A regular briefing for the alternative asset management industry.
It was always optimistic to hope that sticking closely to EU rules would persuade Brussels to give UK firms access to the single market, but now that any such deal seems to be off-the-table, the mood in the City has adapted. UK policymakers are getting plenty of advice on how to regulate financial services, and there is a growing appetite for change. While consistency with EU rules and international standards remains crucial, the UK can use its expertise in financial services regulation – and its ability to flex rules quickly as circumstances change – to its advantage. No one is calling for a bonfire of regulations; indeed, in some areas, more regulation is needed. But the calls for concrete action are growing louder.
Last week, the Alternative Investment Management Association (AIMA) and its affiliate the Alternative Credit Council (ACC) made an important contribution to the debate. At a conference to mark the launch of AIMA's Vision Paper, Travers Smith partner Phil Bartram emphasised the need for ambition on the part of government and regulators, but also appealed for a holistic approach to the reform agenda.
Ambition is needed because there is a lot at stake for the UK, and a number of competitor jurisdictions – including the EU itself – are keen to take business from London. That ambition should not be parochial. Interventions will no doubt help to fuel investment in the UK's real economy and finance the green transition, but the UK also needs to preserve its position as an international hub. For example, it should be easier for investors to set up shop in Britain, giving them access to the City's world-leading infrastructure and advisory community, even if the bulk of their activity extends beyond the UK.
As we pointed out in our wide ranging response to the government's recent consultation on the funds regime in the UK – itself an encouraging sign that policy-makers are now ready to make changes – any strategy also needs to be holistic, because individual initiatives are unlikely to succeed unless all parts of the legal and regulatory framework are aligned. We recommended the establishment of an asset management competitiveness unit – a permanent team in government responsible for monitoring and promoting the competitiveness of the sector.
AIMA's policy prescriptions are pushing in the same direction. They include support for the non-bank lending sector and new forms of financing, including for asset managers that can provide growth capital, plugging the gap left by traditional lenders. In that regard, there is support for the new Long-Term Asset Fund (LTAF), which could unlock significant pension fund assets for the sector, while democratising access to private markets. But, alongside the LTAF, other suitably regulated and tax neutral professional investor fund vehicles would be helpful, to position the UK as a ‘one-stop shop’ for professional investor fund management. AIMA also calls for a review of the regulatory framework, especially AIFMD and MiFID II, to ensure that these are serving the regulator's objectives in a proportionate manner.
