Multinational Asset Managers Face a One-Two Brexit Punch
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Friday, June 24, 2016

Multinational Asset Managers Face a One-Two Brexit Punch

Brexit has carried the day, the British public has voted to leave the European Union, and asset managers that straddle both sides of the Atlantic are already feeling some of the pain.

Bloomberg, the Financial Times, and Reuters all report that shares in publicly-traded UK multinational asset managers are already taking a beating.

As of 1:28PM GMT (8:28am here in New York), Aberdeen's [profile] shares are down 11.38 percent, Henderson Group's [profile] shares are down 19.65 percent, and Schroders' [profile] shares are down 11.07 percent. Henderson CEO Andrew Formica calls Brexit "a huge confidence shock" for the UK, while Aberdeen CEO Martin Gilbert says it's "important to keep a calm head."

There at several Brexit pain points for asset managers. First, there's the broader market pain. As of 1:29pm GMT, the FTSE 100 index on the exchange in London is down 3.96 percent since open. And that directly hits the AUM of asset managers with British assets in their portfolios, and hitting AUM means hitting asset-based fees.

But there's a second-order impact expected around the corner. "It is potential impacts on gross sales that are a bigger concern," writes Jefferies analyst Phil Dobbin. Watch for redemptions to rise again; Bloomberg points out that, per a BofA Merrill report citing EPFR Global Data, last week UK equity funds suffered their second-biggest weekly net outflows ever, $1.1 billion in total.

There's a third worry looming, over asset managers and over financial services multinationals: regulatory complexity and upheaval. Reuters points out that HSBC chairman Douglas Flint is calling navigating this new era of business "complex and time consuming", and the wire service also reports that J.P. Morgan CEO Jamie Dimon is telling employees that "his bank may need to make changes to its European legal entity structure and the location of some roles to comply with new laws, casting a pall over its 16,000 strong workforce."

Meanwhile, on this side of the pond even the lead up to the Brexit vote was already having an effect. Reuters reports that U.S. stock funds suffered $6.1 billion in net outflows for the week ended Wednesday, June 22.

"The theme is Brexit, and people are concerned," Thomson Reuters Lipper research chief Tom Roseen tells the wire service.

And IBD and Money are already telling U.S. investors how they should (or should not) react to the Brexit decision.

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