BlackRock and Goldman Sachs Asset Management both plan to temporarily move some British-based fund managers to New York in the event of a no-deal Brexit, two sources told reporters.
The portfolio managers would eventually be transferred to mainland Europe to handle client accounts there once Britain and the EU agree a regulatory framework, the sources said.
However, neither of the firms, who combined employ more than 10,000 people in London, expect a chaotic exit that would force them to carry out the emergency relocation, the sources said.
A spokeswoman for BlackRock, which is the world’s biggest assets manager with about US$6.3 trillion, declined to comment on the plan, but in an e-mailed response to Reuters said: “BlackRock maintains extensive regulatory licenses and permissions across Europe and globally to ensure it can continue to serve its clients post-Brexit.”
To avert such moves, the European Securities and Markets Authority (ESMA) is in talks with Britain’s Financial Conduct Authority (FCA) on agreements which would oversee cross-border asset activity and managers.
The US makes sense as a temporary base for Goldman and BlackRock, as Europe has cooperation agreements with US regulators, so managers could handle European clients’ accounts from there until the ESMA and FCA have theirs.
“By pulling the UK out of Europe, there’s potentially a regulatory hole, because the UK doesn’t have a cooperation and information-sharing agreement with each EU country,” said Neil Robson, regulatory partner at law firm Katten Muchin Rosenman.
An ESMA spokesman said it expects to have agreements in place before the end of March.
If not, BlackRock would move about 10 equity portfolio managers to New York, one source said, adding that they would later move to the eurozone.
Goldman’s asset management business, GSAM, with 50 managers in London, has plans to send “a handful” to the US financial capital until a framework is in place, the second source said, adding that they too would eventually relocate to the eurozone.
GSAM has picked Dublin as a center for administrative staff if it loses access to the single market from London following Brexit.
“We continue to monitor the situation and are prepared to serve clients whatever the outcome,” a GSAM spokesman said.
Although London-based asset managers already operate funds listed in Luxembourg and Dublin, holding more than 1 trillion euros (US$1.1 trillion) of assets for customers across the bloc, they might not be able to continue operating as they do now post-Brexit.
“Until such time as the UK has that agreement in place with each of the EU[‘s] 27 member states or with ESMA on behalf of all of them, UK managers would find it difficult to conduct marketing of their funds in such countries,” Robson said.
Adam Jacobs-Dean, managing director and global head of markets regulation at the Alternative Investment Management Association in London, said that most of its member firms are working on the assumption that new agreements will be in place in time.
“It’s an extreme scenario. Hopefully soon we’ll see agreements being finalized and this falls away in terms of Brexit planning,” Jacobs-Dean said.
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