A UK exit, or Brexit, from the European Union would pose little threat to asset managers’ creditworthiness and have minimal impact on the management of institutional assets, according to Moody’s.
The ratings agency said there would be no immediate changes to asset managers’ operations in the event of a vote to leave because the UK would have two years to renegotiate its terms of trading and dealing with the EU.
It said the operational and business impact for most managers it rates would be manageable.
UK managers will lose management and marketing passporting rights because they would become “third-country firms”, but Moody’s does not expect this to have “profound implications for the asset management industry overall”.
This is for several reasons, including that many UK groups operate in Continental Europe through subsidiaries, and vice versa for Continental European managers.
Financial market volatility resulting from Brexit, however, will weigh on asset managers’ profitability.
Neither will Brexit have much impact on the management of institutional assets, according to Moody’s.
It noted that the Markets in Financial Instruments Directive (MiFID) applies in the EU with respect to institutional clients’ private placements or segregated accounts.
It said it expected the UK, if it left the EU, would “meet the equivalence test and be able to continue servicing institutional investors in the EU”.
Moody’s also noted that any asset-manager services provided “at the exclusive initiative” of institutional investors have no prerequisite requirements.
If the UK, however, decides to depart from EU regulation and not implement the revised MiFID, then “servicing EU clients from the UK would become more difficult”.
This is not Moody’s main scenario, it said.