Willis Towers Watson has established a new company to offer investment services in Germany amid uncertainty caused by Brexit.

The new firm – Willis Towers Watson Investments – will allow WTW to continue to provide investment services to clients when the UK leaves the European Union on 31 December. The new company will start to operate on 1 January.

“The exact outcome of Brexit on investment services and the pension investment environment is still unclear, and may still be covered under any agreement that may ultimately be made between the EU and the UK,” Nigel Cresswell, head of investments Deutschland at Willis Towers Watson, told IPE.

But, he noted, “most commentators consider it highly unlikely that the ongoing passporting of investment services from the UK to the EU27 will be permitted”.

He added: “This has ramifications for pension fund investors based in the EU27, and they should already ensure that their providers have taken all the necessary steps to continue to provide their services after 31 December 2020.”

With the MiFID passport, investment firms located in countries within the European Economic Area (EEA) can offer investment services in another EEA member state without a separate authorisation from the supervisory authority of the host country.

WTW has created the new legal entity for investments services in Germany and obtained its new license from the financial supervisory authority BaFin.

“This will enable us to continue providing, uninterrupted, our full range of regulated services such as asset management product selection, investment solutions such as private market sleeves, or full fiduciary asset management to institutional investors in Germany, and furthermore across the EU27,” Cresswell said.

WTW has decided to make Germany the hub for providing these services in continental Europe after Brexit, he added. It calculated that the increasing trend towards outsourcing has led capital investments managed through fiduciary management to spike to $1.96trn this year from $941bn in 2013.

A challenging capital market and a complex regulatory environment have been the driving forces behind the outsourcing trend, according to WTW.

Pensionsfonds, Pensionskassen, contractual trust arrangements (CTAs) and foundations have to significantly restructure their portfolios to achieve adequate returns in the future during a low interest rate environment, it said.

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