UK-based asset manager M&G is planning to transfer four of its funds to Luxembourg to remove uncertainty for non-UK investors ahead of the country exiting the EU.
The funds are worth a combined €7bn and are offered exclusively to non-UK investors, despite being domiciled in London.
Anne Richards, chief executive of M&G, said: “With little clarity yet on the outcome of the negotiations between the UK and the rest of the European Union on its future trading relationship, we believe it is prudent to take action now to protect the interests of our international customers.
“The proposals to transfer the assets of these four funds have a primary aim – to minimise disruption for our investors. Approval of the transfer will ensure they retain access to the same strategies and the same fund managers.”
Luxembourg’s regulator, the Commission de Surveillance du Secteur Financier, and the UK’s Financial Conduct Authority have both given the transfer the green light. The proposal will be put to investors in the four funds in September with a view to moving the assets to the fund manager’s existing SICAV in November, according to a statement from M&G.
The four funds affected are:
- M&G Dynamic Allocation
- M&G Income Allocation
- M&G Prudent Allocation (to be renamed M&G Conservative Allocation)
- M&G European Inflation Linked Corporate Bond
Data from trade body the Investment Association (IA) showed that non-UK investors had £73.7bn (€83.5bn) invested in UK-domiciled funds managed by IA members at the end of April. Meanwhile, UK investors had £107.7bn invested in non-UK domiciled funds. Ireland and Luxembourg are the primary homes for these funds.
Earlier this year, David Suetens, managing director of State Street in Luxembourg, told IPE there could be “some re-shuffling of products and investors” ahead of the outcome of the UK and EU negotiations being known. State Street helped M&G set up its Luxembourg operation.
Suetens said: “Promoters will most likely re-direct EU investors to EU-based vehicles and keep OIECs [UK investment vehicles] as local distribution products. This said, to the extent regulatory frameworks for funds remain comparatively equivalent between the UK and the EU, and consumers are still allowed to purchase cross border… the choice ultimately will still reside with the investor who will set the course.”