For over two years, we have been working to ensure our business is operationally ready for the UK’s departure from the European Union in 2019. In these FAQs, we set out our position on what Brexit means for Aviva Investors and our clients.
1. Has a dedicated team dealing with Brexit-related issues been established at Aviva Investors?
A project team was established after the referendum, which includes representation from all business areas and all our EU entities. The project team has prepared contingency plans, which will be implemented ahead of the UK’s exit in March 2019.
2. What is the operational impact of Brexit on Aviva Investors?
We are comfortable that only relatively minor changes to existing organisational structures would be required under the most likely scenarios.
We have considered how the post-Brexit environment could impact our operating model, including the possibility of a “hard Brexit”, under which there would be no transition period. Given the work being undertaken by the Financial Conduct Authority (FCA) and HM Treasury to minimise market and operational disruption, we do not expect any impact on our UK fund range.
Our business also operates cross-border, using a variety of fund structures to meet the requirements of clients in different geographies. For several years, we have been able to serve European clients effectively through our Luxembourg entity and SICAV fund range; as well as our sizable presence in Ireland and France.
3. How will Brexit impact Aviva Investors’ ability to source investment opportunities in Europe?
We continue to monitor events and financial markets closely and the risks and opportunities presented by them. Regular stress testing of funds against various scenarios is a core part of our daily investment and risk management process and helps us make informed decisions to protect client portfolios.
The asset management business is global, and Brexit will not impact our ability to continue to source the most suitable investment opportunities for clients throughout Europe and beyond.
4. How is Aviva Investors preparing for a ‘Hard’ or ‘No Deal’ Brexit?
Our Brexit project team has been preparing for different scenarios, including a ‘no deal’ outcome. We believe that we will be operationally ready for a hard Brexit on 29th March 2019, if it arises.
Following recent announcements from the European Securities and Markets Authority (ESMA), the European Commission and other European regulatory bodies on co-operation agreements, we believe we will be able to continue to outsource or delegate portfolio management activities from the EU back to the UK after 29th March 2019. This will allow us to continue to make use of the expertise we have in the UK. (Please also refer to Question 6).
5. What is your view on a transitional agreement?
It is important asset management firms have sufficient time to implement contingency plans to ensure they can continue to serve customers effectively. While the UK and European Union have reached agreement on the terms of a transitional period to start from 29 March 2019, this will only come into force if and when the Withdrawal Agreement is approved by the UK Parliament, the European Parliament and EU Council.
6. What is your position on delegation of portfolio management?
The ability to delegate investment and risk management activities is important to business models across the asset management industry. We believe the current, globally-recognised delegation model protects clients’ interests and gives them access to the broadest range of investment opportunities and expertise.
It would not be in the best interests of UK or EU investors to restrict access to key investment management and capital-raising expertise. As such, we will continue to support meaningful discussions with the relevant parties for the continuation of the delegation model.
Continued delegation after Brexit depends on co-operation agreements being in place between the UK and EU Member States’ regulatory authorities. We are encouraged by recent statements from various European public bodies, including the announcement by ESMA on 30 January 2019 that the substance of regulatory cooperation arrangements had been agreed. We understand that individual regulators are now in a position to sign these with the FCA.
We believe our current organisational structure will allow us to continue to delegate certain key activities to the UK after Brexit, while maintaining appropriate levels of governance and oversight.
7. Are you making any changes to your EU branches ahead of Brexit?
Our European branches will continue to provide investment services and activities as branches of our Luxembourg entity. We are working with the relevant national authorities to ensure we obtain the correct regulatory permissions prior to the UK leaving the European Union.
8. What will happen to EU funds marketed to UK investors?
Certain Aviva Investors funds are domiciled in Europe and currently marketed to UK investors via an EU marketing passport. The FCA has implemented a temporary permissions regime to enable UK investors to have continued access to EU UCITS in the event of a ‘no deal’ Brexit. Aviva Investors intends to make use of this provision and will make the notifications for affected funds in advance of the 28th March 2019 deadline.