FAQ UK withdrawal from the EU
This page outlines Insight’s plans to maintain an uninterrupted service for our UK and European (excluding UK) clients throughout the Brexit process.
How is Insight planning for Brexit?
Before the UK referendum on EU membership in June 2016, Insight created a Brexit programme, drawing on personnel from across the business and bringing in external advisors where necessary. A key objective of this programme has been to determine the best way to maintain the level of service we provide to our clients throughout the Brexit process.
Questions for clients in Europe (excluding the UK)
What is Insight doing in Europe (excluding the UK)?
Creation of European hub
To support our European ex-UK segregated business Insight has taken the strategic decision to create a European hub. Our current plan is to expand our existing Irish funds business to fulfil this role. The reasons for this include:
- Ireland is the domicile of our existing pooled fund range
- our familiarity with the Irish regulatory regime
- the extent of relevant experience and capabilities we have within Ireland
- natural synergies including shared language, legal regimes etc.
Having undertaken detailed analysis of our options we have determined that the most appropriate strategy for us to serve our clients is to structure our European hub through the extension of Insight Investment Management (Europe) Limited’s regulatory permissions to also include individual portfolio management, investment advice and receipt and transmission of orders.
Insight Investment Management (Europe) Limited was responsible for €108.9bn of assets as at 31 December 2018 and is the third largest asset management company in Ireland. Insight Investment Management (Europe) Limited was originally incorporated as Insight Investment Management (Ireland) Limited in April 2016 (its name was changed to Insight Investment Management (Europe) Limited in 2018 to better reflect the nature of its business) but Insight has been providing investment services from Ireland since 2002.
Frankfurt branch office
Insight opened a branch office in Frankfurt, Germany on 2 July 2018. We are now in the process of obtaining approval for a German branch of our European hub in order to ensure continuity of operation for this entity. The Frankfurt office is located at Insight Investment, MesseTurm, Friedrich-Ebert-Anlage 49, 60327 Frankfurt am Main.
How will this impact investment management and trading activities?
The European Securities and Markets Authority (ESMA) and European securities regulators have agreed a Memoranda of Understanding (MoU) with the FCA which will allow Insight to continue to delegate portfolio management to the UK for its EU-based funds. It is expected that the FCA will have executed a MoU with each individual EU national regulator prior to 29 March 2019.
“A multilateral MoU (MMoU) between EU/EEA securities regulators and the FCA covering supervisory cooperation, enforcement and information exchange between individual regulators and the FCA, and will allow them to share information relating to, amongst others, market surveillance, investment services and asset management activities. This, in turn, will allow certain activities, such as fund manager outsourcing and delegation, to continue to be carried out by UK based entities on behalf of counterparties based in the EEA.”
Questions for clients in the UK
What happens to UK clients with holdings in Irish-domiciled funds?
A Temporary Permissions Regime (TPR) is being introduced by the Financial Conduct Authority (FCA) to cater for the scenario where no deal is reached on the withdrawal agreement. This will allow EEA domiciled funds to continue to be marketed in the UK within the scope of their current permissions, for an initial period of up to 3 years. As such we do not anticipate any issues with our UK-based clients being able to continue to hold our Irish-based funds.
Under the TPR fund managers have to notify, via the FCA’s Connect system, the FCA prior to 29 March 2019 of their wish to continue marketing eligible funds in the UK. The FCA opened the notification window on 7 January 2019 and it will close on 28 March 2019. We aim to finalise the registration of all of the applicable Insight funds by mid-March.
The renaming of our Irish entity will require changes to fund documentation, but our objective is to align the timing of these changes with the annual documentation update cycle so as to minimise disruption.
Questions for all clients
What will be the impact on counterparty relationships?
We have conducted our own due diligence, have met with all of our major counterparties and have sent questionnaires to our counterparties. Our counterparties have not raised any specific issues with us, other than where we may need to migrate trade execution to their EU entity in order to continue trading in the situation where “look-through” to the location of the end client is applicable.
What will be the impact on outstanding swaps and derivatives of Brexit?
We have conducted our own investigations, including meeting with key counterparties, to analyse the potential impact of Brexit on the derivatives portfolios of our clients. Whilst there are still outstanding Brexit related political and regulatory risks; at this stage Insight is not anticipating any impact to existing derivatives traded with UK counterparties or the ability to enter into new trades with UK counterparties. We also do not envisage any impact to EU-domiciled funds dealing with, or with outstanding positions with, EU-domiciled counterparties.
How will Insight prepare for potential market volatility?
It is likely that we will take some investment actions (e.g. reducing roll activity and/or raising additional liquidity) to help protect against the impact of a possible increase in market volatility around key dates. The extent of any actions would depend on how Brexit negotiations evolve.
What instruments must be cleared if the pension exemption on clearing is lost?
The instruments that would be subject to clearing are currently:
- LIBOR swaps from 28 days up to 50 years
- SONIA OIS from 7 days to 3 years
- 5 year iTraxx main and crossover
This list is likely to grow over time.
We advise that you seek your own external legal advice on issues created by Brexit and the impact they may have on you.