UK fund investors move £62 billion offshore for Brexit prep

Global custodians and fund administrators have bolstered their teams in Ireland and Luxembourg in anticipation of these new flows.

By Joe Parsons

Britain’s impending exit from the European Union has driven UK investors to move a net £62 billion of their fund investments to new markets, with Ireland and Luxembourg benefiting the most.

According to the Fund Flow Index (FFI) from Calastone, the largest global funds transaction network, it showed £42 billion of funds capital moved to Dublin since the 2016 referendum, while Luxembourg acquired just under £20 billion.

In March 2019 alone, when the UK was initially set to leave the EU, investors placed a net £2.7 billion in EU-based funds, almost three times the amount that flowed into UK regulated funds.

“Dublin and Luxembourg have been the real winners from the UK’s decision to quit the EU,” said Edward Glyn, head of global markets, Calastone.

“Big political events have clearly influenced investors: flows offshore have risen markedly at key moments of instability connected to the Brexit story. Institutional and high-net-worth individuals are mainly responsible for the trend; smaller retail savers remain focused on UK-domiciled funds, suggesting that more sophisticated investors have the greatest concern about the consequences of Brexit.”

Ireland has been touted as the next big fund domicile as a result of Brexit. Last year, research from State Street showed Ireland is expected to overtake the UK and US as the second top fund domicile for asset managers within the next five years.

Of 250 asset managers surveyed globally by the Boston-based global custodian, 62% of funds will be domiciled for distribution in Luxembourg within five years, followed by Ireland with 55%.

Global custodians and fund administrators have bolstered their teams in Ireland and Luxembourg in anticipation of these new flows. JP Morgan, Northern Trust, Clearstream and Intertrust have all recently opened new offices and increased staff in Ireland to account for the growth in the country.

«