Brexit will blunt impact of UK PFLP

Brexit will prevent non-British fund managers domiciling in the country and restrict their uptake of the recently-launched simplified private funds limited partnership structure, according to industry sources.

Just five percent of delegates polled at Invest Europe’s CFO Forum in Berlin on Tuesday said their firm was considering domiciling its next fund in the UK. This compared with 47 percent that said they were considering Luxembourg and 12 percent that are eyeing the Netherlands.

There was consensus other jurisdictions – including two in the European Union and established offshore centres in the Channel Islands – were more attractive choices than the UK. This is despite the recent revision of the UK’s limited partnership law which both brings the country’s rules in line with those in neighbouring jurisdictions and reduces the administrative burden on fund managers, as reported by pfm.

“The UK was one of the preeminent fund destinations, and the PFLP dealt with its ‘quirky’ partnership law that didn’t compare favourably with those of other countries. But in light of Brexit, it’s unlikely to be used much by any fund manager from outside the UK,” a UK-based general counsel from a private equity advisory said during a panel discussion.

While Brexit isn’t the most important consideration among fund managers choosing where to domicile their next fund, the panel of European CFOs said it is definitely impacting the decision making process.

“It’s still very much wait and see, but I still can’t see fund managers from outside the UK choosing to domicile there at the moment,” the general counsel said. “The question of Brexit is likely to become more pressing as the exit negotiations progress.”

Panellists agreed that fund managers are generally spending more time and money on establishing where to domicile new funds compared with five years ago. They said the key factors taken into consideration during the decision making process was a country’s tax and regulatory regime, and investor sentiment towards a jurisdiction.

“There are benefits to investing onshore – such as access to the Alternative Investment Fund Managers Directive passport, but these need to be balanced with the cost of complying with the regulation,” the chief executive of a Dublin-based fund administrator said.

There are fewer costs associated with domiciling offshore, but some investors can be “less keen” as they are missing out on the security of the AIFMD regulatory regime, the chief executive added.