Fund managers expected to escape no-deal Brexit nightmare

UK-based fund managers are likely to avoid any heavy impacts should the country crash out of the European Union without securing a deal in a month’s time, according to credit rating agencies.

Fitch, which tracks the viability of companies through analysis of their debt, structure and operating environment, is the latest to announce its relatively positive view on the fund management sector.

In a note this week, it said the “rating watch negative” assessment it had applied to the UK on 21 February did not imply an immediate threat to the ratings of the fund management sector, referred to as “non-bank financial institutions” (NBFIs).

“A one-notch sovereign downgrade would not, in itself, trigger issuer downgrades,” Fitch said. “And there is no automatic sovereign cap under Fitch’s NBFI rating criteria.”

However, it said the potential for companies to default in the long term might rise, as might the cost of their access to funding, but this was based on individual cases rather than to be taken as a blanket statement for the industry.

The statement followed one made by Moody’s earlier in the month, which said the industry had received a shot in the arm from the memoranda of understanding (MoUs) signed by financial regulators in the UK and EU to allow the sector to function normally, even in the event of a no deal. 

Moody’s said the MoUs were “credit positive” for asset managers. 

This week, Fitch said the highest-rated UK NBFI was Schroders, which has an A+ rating, with all others below the A category, unless support-driven from higher-rated parent companies. 

The rating agency said that, where outlooks were currently negative (Provident Financial at BBB- and International Personal Finance at BB), this was for individual reasons not specifically linked to Brexit.