The CFA Institute’s 2018 Brexit member survey reveals some signs of optimism about the impact of a post-Brexit world on the asset management industry, but challenges for UK investment management are anticipated.
The latest survey reveals a degree of confidence among investment professionals that Brexit negotiations will end with a trade deal. Globally, almost half (49 per cent) of investment management professionals responding to the survey expect Brexit negotiations to result in either a comprehensive trade deal covering both goods and services (25 per cent), or a goods only deal (24 per cent).
Respondents outside of the EU were generally most optimistic, led by those in China, where 52 per cent anticipate a comprehensive trade deal will be agreed. In the UK, 17 per cent of respondents expect Brexit negotiations to deliver a comprehensive trade deal, with most (23 per cent) expecting a goods only agreement. For respondents in Switzerland and Germany, the most likely outcome anticipated is a UK ‘crash-out’ EU exit (35 per cent and 30 per cent, respectively).
On UK market competitiveness, the survey highlights a modestly improved outlook on the part of UK investment professionals, with slightly fewer in this year’s survey believing that Brexit has caused a deterioration in the competitiveness of their home market (68 per cent, down from 70 per cent in 2017 and 74 per cent in July 2016). Still, 64 per cent of UK respondents expect Brexit to negatively impact their firm’s ability to attract the best talent, and 67 per cent expect their firms to reduce their UK presence – this number rises to 76 per cent of those polled in the EU (ex UK). The survey also reveals that 80 per cent of respondents worldwide expect Brexit to negatively impact UK returns. This rises to 90 per cent of EU (ex UK) respondents.
Most in the UK (51 per cent) felt optimistic that the UK would maintain its regulatory alignment with the EU from a financial markets perspective. However, on the question of delegation restrictions (such as outsourcing of portfolio management), few either in the UK or globally considered the prospect as positive for investors: notably, respondents in China (52 per cent) and the UK (49 per cent) felt delegation restrictions would be negative for investor outcomes.
The survey results place Frankfurt as the most likely perceived winner from Brexit, followed by Paris, Dublin, Luxembourg and Amsterdam. Paris is the biggest mover, moving up from fourth place to joint-second, and Amsterdam’s ascent into the top five edges New York into sixth place.
Gary Baker, CFA, Managing Director EMEA and Industry and Policy Research, CFA Institute, says: “What is powerful about this research is the body of opinion it provides from a large number of investment management professionals around the world, many of whom have no emotional investment in Brexit. While we see some signs of optimism, views of CFA Institute members vary between the markets, and much uncertainty remains over the likely outcome of the Brexit negotiations.”
Globally, a higher proportion of respondents think that EU strengthening is likely—34 per cent compared with 13 per cent in 2017—and far fewer respondents now anticipate more EU exits to follow the UK’s departure (30 per cent down from 59 per cent). Additionally, fewer imagine Brexit will spur UK fragmentation (41 per cent down from 53 per cent). However, uncertainty that Brexit will go ahead has risen: 15 per cent of respondents now think it likely that Brexit will not happen—up from 5 per cent in 2017.
Will Goodhart (pictured), Chief Executive, CFA Society UK, says: “The emotional temperature as revealed in the latest CFA Institute Brexit survey is falling, but the most recent findings show considerable concern for the UK’s competitiveness as a financial centre. In light of the uncertainty over how the Brexit trade deal negotiations will play out, an increasing number of survey respondents in firms with a strong UK presence expect to see that presence reduce. Respondents, whether from the UK, EU or rest of the world, are also pretty clear that restricting delegation arrangements would have a negative effect on investor outcomes.”
