Dual funds regime mooted as City saviour and post-Brexit cross border solution

UK and European-wide think tank and lobbying group, The New City Initiative, has called for a “dual funds regime”, as a solution that, it believes, would remove the need for fund managers to re-structure their businesses to onshore EU locations, such as Ireland and Luxembourg, post-Brexit.

In an opinion paper published today, in which the NCI looks at the potential impact of Brexit on financial services, a dual funds regime is being touted as a potential solution to the concerns surrounding ‘passporting’ that, as reported, has been leading to some of the world’s largest financial institutions considering departing London’s financial district.

A dual funds regime – should it be successful – would bring revenues to the UK and create new opportunities across financial services, NCI said in its statement. As the true impact and outcomes of Brexit negotiations will not be known for some time, the UK government should, NCI says, be considering how it could leverage the UK’s “deep expertise in fund management to create a truly bespoke funds regime”, which would allow managers to market into both the EU and rest of the world.


Should passporting be unattainable, some sort of equivalence regime or bespoke deal must be agreed upon and a failure to achieve this could lead to major problems, such as a resurgence in regulatory fragmentation and protectionism, which, as NCI says, will “bring harm to the asset management industry and financial services sector globally”.

The NCI polled its members, in the months after Brexit to gauge their opinions on the current market predicament. Respondents were taken from the 54 independent asset management firms from the UK and across Europe, managing about £400bn and employing several thousand people.

Regulatory arbitrage between the UK and EU was cited by 54.5% of NCI members as their biggest worry; 27% identified market volatility as a paramount concern, while 18% acknowledged investor outflows/fundraising challenges was likely to be a challenge.

As a solution, the NCI believes that if the UK government sets up a dual funds regime, it would help asset managers deal with many of these – and other – worst-case scenarios. A majority of the NCI members polled (73%) agreed this was in the UK’s interests.


“A dual funds regime would help provide stability to the UK and EU asset management space,” said Jamie Carter, deputy chairman of the New City Initiative. “[It] would allow UK managers with European Union interests to continue to comply with EU laws and directives and retain favourable access to their EU investors, while simultaneously letting others market to the rest of the world ex EU, and avoid the worst excesses of EU regulation.

“Such a regime may also enable fund managers to avoid re-structuring their businesses to onshore EU locations such as Ireland and Luxembourg, provided equivalence for the UK is granted.

“Timely planning or consulting on the creation of a dual funds regime will help stem potential outflows from European investors and allay concerns among prospective investors about putting money into UK funds.”

‘UK importance’

Carter added that any eventual dual structure should also allow the UK to create its own funds regime borrowing from the best of breed regulations globally. “The importance of the UK as a European fund centre should not be underestimated,” he added. 

Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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