European Brexit FAQs
After three years, much of our pre-Brexit preparations are complete. We extended the regulatory permissions of our Luxembourg entity to ensure we are able to continue existing business relationships in the EU/EEA with minimal disruption to clients and counterparties. We have also taken the opportunity to consolidate the existing EU management company operations in Ireland and Luxembourg within a single structure in Luxembourg, recognising there were efficiencies to be gained in terms of infrastructure, resources and capital.
We continue to maintain a dedicated Brexit programme and work streams focused on identifying any likely service-level disruptions and to recommend contingencies to mitigate disruptions. We have also been liaising with our Investment Management delegates to determine what areas of impact to contracts with EU counterparts and the extent these will need to be novated. As we have existing service offerings across Europe, as well as in the UK, we consider it a priority to maintain service levels throughout this process.
At this stage we have not identified any incremental costs or charges in respect of management and administration, which would be borne by the sub-funds as a result of Brexit. In the event that there are incremental costs and charges arising, these would be disclosed to investors in accordance with the relevant regulations.
However, it should be noted there are certain transactional costs to which the sub-funds are subject, such as market spread, that are driven by markets and to the extent such costs may increase as a result of Brexit is obviously beyond the control of the Manager / Investment Manager.
Liquidity of all sub-funds are constantly reviewed to ensure portfolios are being managed in line with the redemption terms offered. To date no major issues have been identified from this analysis.
The UK Government has implemented a temporary permissions regime (TPR) which aims to ensure EEA investment firms and funds currently operating in the UK under the existing EU passport mechanisms can continue to do business as they do today, for a temporary period following the UK’s exit.
As the UK enters an implementation period, post withdrawal on 31 January, EU rules will continue to apply in the UK throughout 2020.
However, there remains no agreement at the EU-level on the marketing of UK funds to retail investors within the EU following the expiry of the implementation period (which ends 31 December 2020). As such the question of whether an EU investor may retain an investment in a UK-based fund will depend on the individual / underling investors’ circumstances. To the extent their “charter” requires them to hold UCITS funds then it’s likely they would have to disinvest or refrain from making further investments in a UK-domiciled fund.
BNY Mellon Global Funds (BNYMGF) is our flagship UCITS product offering in the EU and the strategies are broadly consistent to those offered within the UK fund range. To the extent that the strategies represented within the BNYMGF range do not meet the full requirements of clients based in the EU/EEA, we may launch additional funds in BNYMGF to mirror existing UK funds. If this is not possible for some reason, we may by exception look to make a notification to the relevant EU Member States to market the UK funds under national private placement regime applicable to third-countries under the Alternative Investment Fund Managers Directive (AIFMD).