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08/31/2016 13:30America/New_YorkHFM Consequences of ‘Brexit’ workshopHelping you firm make practical preparations for a fundamental shift in the political status quo.The Millennium Hotel - Mayfair, LondonfalseMM/DD/YYYY
The political world has been turned upside down by Britain’s decision to leave the EU, but other than a challenging trading environment what does it, and could it, mean for your hedge fund business?
Find out at this practical half day workshop. By examining the immediate, short- and long-term consequences of Brexit through focused roundtable sessions, you’ll gain expert guidance on how to help prepare your firm for the changes ahead.
The workshop is free to attend but by invitation only to a select group of senior hedge fund management professionals. To apply to attend, please contact Kristina Kvedorelyte at firstname.lastname@example.org or telephone +44 (0) 20 7832 6689.
14.00 You and the EU: The immediate, short- and long-term consequence of EU secession
• The political world has been turned upside down, but other than a challenging trading environment what does it, and could it, mean for your hedge fund business?
• What are the obvious pitfalls? Does it cut you off from a coherent European distribution plan, will it restrict you from hiring the brightest and the best?
• Impact on service providers – renegotiating prime brokerage agreements etc could be lengthy and costly. How should you approach this?
• If your service provider relocates to Luxembourg or Dublin is this a problem or just a minor adjustment?
• What does it mean for current investor agreements? What sort of questions have you been fielding?
• What should the c-suite be doing to prepare for change? What should the distinct roles played by CCOs, general counsel, heads of IR and COO and CFO be? How should your firm hatch a plan to prepare?
• Is London still a viable centre for your business? Where else would you consider?
• Are you concerned about preparing for EU regulation (Mifid II etc), only to face the prospect of having to row back again? What would a proportionate response be?
• Are there any potential benefits to the change? How can a London based management firm use EU secession to its benefit?
14.45 Roundtable sessions (three discussion focussed roundtable topics repeated for small groups over three concurrent sessions)
1. Regulation, what to expect? Clinging to the status quo, a natural evolution or a significant sea-change
• Impact on AIFMD – majority of managers will still use private placement rules
• If the UK is able to negotiate access to the European single market while leaving the EU, UK AIFMs may continue to be able to operate as EEA-AIFMs and passport across EU member states
• There is also the possibility of the UK being granted a passport extension post-Brexit- something experts say would be likely given the UK’s regulatory synergies with the EU.
• Under an agreement where the UK lies outside the single market, UK managers with a European-based AIF would have to set up a self-managed AIF in an EU jurisdiction or contract with an AIFM service provider in an EU region in order to manage and market the fund across Europe.
• Depositories: Post-Brexit, UK-based managers with Cayman funds would no longer have to have a depo-lite solution in place. FCA might still demand a depository in this situation, say some experts.
• Mifid II has faced a number of delays and is now likely to be introduced in January 2018, before the likely date of the UK leaving the EU.
• Legal experts suggest UK-firms still need prepare. The FCA has said all European regulation will continue to apply until the UK has formally left the EU. As a regulation, Mifir will need to be transposed into UK law while the directive will come into force through FCA consultations.
• The UK is likely to maintain most Mifid rules at a national level because it has been a key driver behind the push at Brussels- this includes the reforms to dealing commission and new recording requirements. However, the FCA has already offered some key concessions around the new rules, such as announcing in December that most AIFMs will not have to abide by the burdensome new transaction reporting rules that are set to apply.
• In terms of passporting, a third-country firm whose home state meets the equivalency test, which the UK should easily do, will be subject to a light touch regulatory regime to allow it to market its Mifid portfolio services across Europe, as long as it registers with Esma.
• Overall, although it might be tougher for UK retail managers, the passporting process for UK firms marketing to professional investors should be straightforward.
• Under Emir, managers will start reporting all OTC derivatives trades to Esma by January 2017 and experts say they expect to maintain Emir reporting standards as they are part of global regulatory reforms agreed by the G20 grouping of nations.
• However, post-Brexit some of the requirements could become less onerous in certain situations. UK-authorised funds will become third-party counterparties, subject to the Emir regime on a limited basis and as such not subject to the reporting requirement.
• When dealing with an EU-dealer, third-party funds will be subject to certain requirements but not when dealing with a non-EU dealer, which some London-dealers are likely to be post-Brexit.
• In March 2015, the UK won a court battle to stop the European Central Bank requiring all big clearing houses to locate within the eurozone. However, with a Brexit there will be pressure for Euro clearing houses to be based in the EU and away from London. Also. possible derailing of the deal between the Dutch Borse and the London Stock Exchange
• The rewriting of certain derivatives contracts is likely in the future, according to the International Swaps and Derivatives Association. Many EU swaps contracts currently use UK law to settle disputes.
Speaker: Malcolm Goddard, COO, Altima Partners
2. Business and operations: fund structures, service provider relations and retaining valued staff
• A Ucits fund must be EU-domiciled with an EU management company to benefit from the directive’s marketing and managing passport. There is no third-party regime and funds failing this criteria would be categorised as AIFs under the AIFMD.
• Most UK hedge funds operating alternative Ucits funds will already have them domiciled in Luxembourg or Dublin but would have to make changes to ensure they have a management company presence within the EU with the UK manager acting as the delegated investment manager. This should be a fairly easy process to achieve.
• Will Brexit uncertainty add to the current depression in UK launch activity? Experts suggest new launch activity is unlikely to pick up anytime soon.
• Possible increase in managers using incubator/man co platforms based in European regions (Malta/Lux/Dublin)?
• Much will depend on the future of the freedom of movement principle and upcoming negotiations. Vote leave has suggested current EU workers can remain but managers we have been speaking to have been getting very nervous about the potential difficulties around recruiting talent in the future from the EU.
• Are there concerns about changes to service levels at prime brokers if there is a movement of staff to different jurisdictions? Will there be any new operational issues when dealing with EU-based PBs from the UK?
• Speculation that US banks could be the big winners of Brexit. Will US banks take more PB market share as they aren’t impacted by Brexit/UKvEU tensions?
• Will any PB contracts need to be rewritten post-Brexit?
Speaker: James Farrugia, partner, Ganado Advocates Andrew Bates, partner, Dillon Eustace Karoline Keane, director, product structuring, Man Group AHL
3. Investors and raising assets: Is Brexit a break on new investment or could it provide new opportunities?
• Could Brexit drive more allocations to hedge funds either because a) there’s a perception that managers can navigate volatile markets better or b) because certain investors (ie) UK pensions have to adjust their funding/liability expectations [taking a hit from currency or gilts exposure for example?
• Will London-based managers be at a disadvantage V other European or US managers in terms of getting allocations (if investors think they are more likely to face negative business/performance impacts post-Brexit)?
• Will London continue to be the city of choice for US managers looking to set up European operations? Experts predict an expansion of firms’ US European footprints from London into other regions.