Crux Asset Management is to replace a feeder fund that it had introduced to ease client access following Brexit to Richard Pease’s flagship fund instead implementing its “worst case” scenario planning, Portfolio Adviser can reveal.
The Luxembourg-domiciled Crux European Special Situations Feeder fund will instead become a directly-invested fund in a transition due to take place on 8 March 2019 at the latest ahead of the UK’s exit from the European Union later that month.
“Given there is still no concrete guidance with regards to the UK’s relationship with the European Union post March 2019 specifically relating to the financial services sector, we deemed it prudent to prepare for a worst-case scenario,” a spokesperson for Crux told Portfolio Adviser.
Crux is working on the assumption the UK will become a non-EU Alternative Investment Fund (AIF) from 29 March 2019, when the UK automatically leaves the EU. That would result in the Crux UK Oeic losing its passporting rights and Ucits status with follow on effects for feeder funds.
A feeder fund must invest the majority of its assets into a Ucits vehicle in order to maintain its own Ucits status.
Sicav will replicate onshore fund
The directly-invested European Special Situations Sicav will aim to replicate the onshore fund as much as possible although cash positions are expected to vary due to inflow and outflow dynamics.
“The reason that we are doing this restructure is to offer a choice to our existing investors who wish to continue supporting the fund and to potential clients who may prefer a Luxembourg directly invested solution,” the spokesperson said.
The feeder fund size is currently just €3.2m (£2.9m), according to Trustnet. But Crux said some UK investors had approached it asking to be transferred into the Sicav. “We are working with HMRC to make this transfer as efficient as possible for investors.”
Management charges on the Sicav fund will be 0.75% with no performance or exit fees and all administrative and legal costs associated with the transition will be borne by Crux.
Luxembourg eats up Oeic assets
Both M&G Investments and Columbia Threadneedle, which have traditionally had a large range of UK-domiciled cross-border funds, made the decision to launch independent funds in the EU ahead of Brexit.
In May 2018, M&G Investments announced it was transferring £34.2bn worth of assets based non-sterling share classes of 21 UK-domiciled Oeics to Luxembourg. A week earlier, Columbia Threadneedle had announced it was launching 13 Sicav versions of existing Oeics and transferring European clients in a further seven UK-domiciled funds to existing Luxembourg-domiciled counterparts.
An M&G spokesperson said: “Following consultation with our international clients, this measure provides both clarity and certainty, and was also designed to bring our product range in line with clients’ investment vehicle preferences.”
Portfolio Adviser understands some asset managers prefer the directly-invested route because it is more straightforward for retail investors to understand.