Some asset managers, however, suggested Brexit unlikely to affect them very much, since most of their funds are already domiciled in other EU countries, such as Luxembourg or Ireland. However, EU law stipulates that asset management operations in EU countries must be ‘substantial’ to benefit from passporting rights. Though this doesn’t necessarily mean asset managers would have to move their entire regional headquarters from London to the EU, a sales office in an EU country, or having your funds domiciled in the EU, would certainly not be sufficient to retain passporting rights.
Legg Mason, a US asset management firm with several offices in Europe, seems aware of these dynamics. “To the extent we need to expand or modify any of our control and compliance functions [as a consequence of Brexit], depending on the requirements, we can do so,” it told Expert Investor.
Franklin Templeton Investments, another American asset manager, is the only non-EU asset manager we spoke to which already has the necessary arrangements in place to continue passporting their funds into the EU after Brexit.
“We do not passport our funds through London. Instead, our flagship range – the Franklin Templeton Investment Funds range – is domiciled in Luxembourg and consists of 85+ funds passported into 39 countries currently,” a spokesperson told Expert Investor. Crucially, this fund range is regulated by the Luxembourg financial regulator CSSF. “The Luxembourg entity has its own compliance and risk management functions and is subject to the regulation of the Lux regulator.”
