Brexit is causing institutional investors to flee London investment funds and flock to those in Dublin and Luxembourg to the tune of €72bn, reported Calastone, a transaction network. Photo: Stephen Darlington via Flickr (CC BY-ND 2.0)
Investors have shifted a net £62bn (roughly €72bn) out of UK investment funds in advance of Brexit, according to data published earlier this month.
Almost two-thirds, £42bn, went to Dublin and “just under £20bn”, or about 32%, went to Luxembourg-based funds.
The figures are from the “Fund Flow Index”, released on 10 April by Calastone, a platform where investment funds are traded by financial institutions.
Fund firms have been moving assets and operations to Dublin, Luxembourg and other continental financial centers to maintain their access to the EU single market.
Edward Glyn, head of global markets at Calastone, stated in the report that:
“...a wall of UK investor money has fled from the UK to Dublin and Luxembourg, where it will remain inside the EU’s regulatory jurisdiction once the UK leaves the union. Big political events have clearly influenced investors: flows offshore have risen markedly at key moments of instability connected to the Brexit story. Institutional and high-net-worth individuals are mainly responsible for the trend; smaller retail savers remain focused on UK-domiciled funds, suggesting that more sophisticated investors have the greatest concern about the consequences of Brexit.”
The previous Brexit deadline at the end of March sparked much of the movement. Calastone stated:
“In March 2019 alone, as the UK Parliament teetered on the brink of a no-deal Brexit, [UK investors] placed a net £2.7bn in EU-based funds, almost three times the amount that flowed into UK regulated funds.”
For comparison, the report said that:
“In the eighteen months ahead of the Brexit referendum, UK investors placed a mere £2.5bn offshore”.
Last month, the consultancy EY estimated that financial institutions, including banks and insurers, had shift roughly £1trn out of the UK to the rest of the EU in the run up to Brexit. New Financial, a think tank, put the figure at £900bn.