Our Brexit FAQs
BNY Mellon Investment Management is well prepared for Brexit. Having worked since the 2016 referendum on contingency plans and in anticipation of possible changes to the way we work, we have been preparing our business for this for some four years. And we started at a good place. We already had two flagship fund ranges – one based in the UK (BNY Mellon Investment Funds – BNY MIF) and one based in Europe (BNY Mellon Global Funds, plc –BNY MGF).
As such, over the past few years we took opportunity to consolidate our existing EU-management company operations in Ireland and Luxembourg. Recognising there were efficiencies to be gained in terms of infrastructure, resources and capital, we established a single structure in Luxembourg.
To do so, we extended the required regulatory permissions needed to enable us to transform that office into our official European headquarters. This was to ensure we were able to continue existing business relationships in the EU/EEA with minimal disruption to clients and counterparties.
The BNY MGF range itself is domiciled in Ireland but now distributed from Luxembourg while our London office, which continues to serve as Investment Management’s headquarters, remains a central resource.
The impact of our Brexit preparations on the BNY MIF range has been minimal as the majority of investors in the Sub-Funds are in the UK. For UK investors, the distribution and management of funds in our BNY MIF umbrella will continue as it did pre-Brexit. We do not expect any material changes will be required following the end of the transitional period on 31 December 2020. However, we will still monitor developments and adapt our plans if needed to ensure the funds are fully prepared.
BNY MGF and BNY Mellon Liquidity Funds, plc
For UK investors in our BNY MGF range and/or a sub-fund of BNY Mellon Liquidity Funds, plc, for now there are no changes. The UK’s Financial Conduct Authority (FCA) has initiated a Temporary Permissions Regime TPR). This means European-domiciled funds can be offered in the UK – using existing EU passport mechanisms – just as they did pre-Brexit. This is for a temporary period of three years so will end in 2024.
Our BNY MGF and our BNY Mellon Liquidity Funds plc umbrellas are both participants in the TPR.
Investors from a EU27 member state
As of 31 December 2020, it is expected the BNY MIF funds will cease to be ‘Undertakings for Collective Investment in Transferable Securities’ (UCITS) and as such cannot be marketed cross-border. This, along with the fact that BNY MIF funds will no longer being registered or domiciled in the EU after the UK’s exit, could have implications for EU investors, including tax consequences, depending on their individual circumstances and the specific rules of their home state. To the extent they need to hold UCITS funds then it’s likely they would have to disinvest or refrain from making further investments in a UK-domiciled fund.
Investors should contact an adviser or a specialist in this area for a proper understanding of the implications of these changes, including any tax consequences, based on individual circumstances.
Where EU/EEA investors remain invested in our UK-domiciled funds, we will maintain certain services. If you are such an investor, it means you should continue to receive the same reports and fund information as you did pre-Brexit. However, such reporting is not intended to constitute marketing and any decision by an EU investor to make any further investment in the relevant fund should be carried out independently and without reliance on any such reporting provided by us.
EU/EEA investors also continue to have the option to invest in our Dublin-domiciled umbrella, BNY MGF. The BNY MGF UCITS umbrella is largely similar to the BNY MIF range. However, where there is demand for a BNY MIF sub-fund not already present in BNY MGF then we may look to launch a mirror version in the UCITS range.
We have not identified any incremental costs or charges in respect of management and administration, which would be borne by the sub-funds in either BNY MIF or BNY MGF as a result of Brexit. In the event there are costs and charges arising, these would be disclosed to investors (and any relevant approvals obtained) in accordance with the relevant regulations.
However, there are transactional costs within each fund, which could be impacted. These are unknowable in advance as they are driven by the market as a whole and as such are beyond the control of the manager/investment manager.
Liquidity of all sub-funds across both BNY MGF and BNY MIF are constantly reviewed to ensure portfolios are being managed in line with the terms offered. To date no major issues have been identified from this analysis.
Nor did we experience any difficulties in the liquidity of either fund range during the heightened market volatility experienced in March 2020 as a result of the Covid-19 lock downs. This gives us confidence the funds across both ranges are well situated to manage any increased volatility that may emerge from Brexit.
We believe we have taken appropriate steps to put the necessary infrastructure in place to minimise any disruption for both our UK and European clients. We have expanded our European presence, building on our existing offices. We are now using our existing management company in Luxembourg to support our business operations within the EU/EEA, having extended the regulatory permissions of this entity to ensure we were able to continue to fully service our European client base.