Cross-border funds to grow in the next 5 years
Asset managers are betting heavy on cross-border funds in the next couple of years in a bid to reach new markets and avoid the Brexit uncertainty.
According to a survey by State Street, the US financial services provider, 64% of respondents are planning to launch cross-border products in the next five years. During the same time frame, cross-border fund domiciles are also expected to experience growth.
In response to Brexit, the poll found the majority of asset managers were reshaping their distribution strategy and expect to increase hiring in new locations over the next five years.
“Brexit is an element, but not the only element,” said David Suetens, head of State Street in Luxembourg, about the reshape, during a press conference in London. “The investment industry faces pressure from falling fees and more regulation. A cross-border platform helps create scale and efficiency, opening distribution to different markets.”
Some 54% said they were in the process of taking action in revising their distribution strategy, while 19% said they had already taken action.
“As cross-border products are increasingly seen as the optimal path for growth, asset managers are looking for domiciles with an established regulatory environment,” said Suetens. “Locations such as Luxembourg and Ireland that can meet regulatory obligations confidently and efficiently are seen as the natural choice by asset managers, allowing them to mitigate risk, achieve economies of scale and reach investors globally.”
In a separate poll, the survey asked if asset managers have, or are intending, to hire staff in a new location. 54% said they expect to take action within five years, 21% were already in the process of taking action, and 18% they had no such plans in the near future.