Experts have called for urgent reform to regulation for emerging fund managers in the UK.
In a meeting at Mansion House on Thursday (May 22), a group of city experts managers asked the Treasury and Financial Conduct Authority to end the “excessive costs, delays, and complexity” facing new asset management firms.
One member of the working group Charles Hall, head of research, Peel Hunt said: “A vibrant fund management sector is an essential ingredient for a vibrant UK capital market, but a heavy regulatory burden is putting us at a major disadvantage compared to our international rivals.
“If we’re serious about the growth agenda, this needs to be fixed.”
The group claims that the current regulatory environment is “stifling innovation, limiting competition, and pushing talent and capital overseas”.
It said launching a fund management company in the UK takes around 18 months with costs reaching up to £1mn.
The working group has therefore put forward a proposal for the introduction of a UK Exempt Reporting Advisor (UKERA) regime modelled on US rules which would enable experienced professionals to establish and operate a UK fund management company under a “lighter touch initial regulatory regime”.
This would allow them to grow before being subject to full authorisation and the accompanying increase in regulatory responsibilities.
The group said restricting access to UKERAs to institutional clients would provide safeguards for retail investors.
Jamie Carter, CEO, Variis Partners, said: “There’s a direct link between supporting fund management start-ups and enabling broader economic growth.
“We’re calling on policymakers and regulators to seize this moment to make the UK a more competitive and innovative financial hub once again.”
The group also recommends that a category of funds exists which could be “established with ease” and can be managed by a UKERA.
It said these funds could come with capital gains tax exemptions and lower compliance hurdles at the start but would be able to evolve into a fully regulated structure as the manager grows.
Dani Hristova CEO of the Investment Management Initiative added: “As it stands, fund management start-ups are largely reserved for individuals with deep personal wealth. This undermines diversity, innovation and growth.”
The group argues its proposed regime would help attract new talent and capital to the UK’s asset management sector.
tara.o’connor@ft.com
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