As London and Paris continue to joust for post-Brexit commercial supremacy, the financial battlefield appears to be shifting from banking to asset management.
Both rival European cities have commissioned research to highlight the importance of their fund sectors and to suggest improvements.
A “critical review” of the French funds marketplace has been carried out by Euroclear France and consultancy Ailancy, to build on the FROG [French Routes and Opportunity Garden] initiative. Its recommendations include technology-based goals, such as providing asset managers with a better knowledge of investors through blockchain technology; digitalisation to promote distribution of funds through robo-advisory services and the streamlining of clearing and settlement systems.
Supporters of Paris like to highlight the size and depth of its domestic rather than international market, with €4tn ($4.7tn) in assets managed by 630 fund houses. They are also increasingly going on the attack against those centres they feel could seize scraps of business from London after Brexit.
“Paris has by far the largest pool of talent, both in terms of experienced professionals and new graduates from some of the best engineering and business schools in the world,” says Jena-Louis Laurens, international ambassador for AFG, the French asset management association. “Luxembourg, Dublin and even Frankfurt have none of these long-term, sustainable advantages.”
Currently, one of his main focuses is persuading foreign fund houses to base their research teams in Paris, to take advantage of favourable tax breaks. Rather than gathering around niches, this represents a core activity, according to the Paris promoters.
“We believe Paris will in the future be the place in the EU where most researchers and portfolio managers will be located,” says Mr Laurens. “We leave admin functions to other places, as we are convinced that those will very soon be performed by robots and revolutionised by new technologies, such as blockchain.”
The view from Paris is also that institutions which initially favoured Luxembourg and Frankfurt are now starting to favour Paris for new job creation, rather than cheaper “quick win solutions”. Mr Laurens also points to the immediate availability of 3.5m square metres of office space in Paris for expansion.
Financial ecosystem
The UK’s initiative, co-ordinated by TheCityUK, concentrates on “connecting investors and yield-returning assets”, highlighting the role of fund management as part of the financial services ecosystem, meeting the financing needs of individuals, businesses and governments.
Like the French push, which aims to educate a public and establishment long suspicious of the financial world, the UK message is just as much an internal as international promotion. The importance of maintaining a healthy fund management sector in London – currently overseeing more than £8tn ($10.8tn) in assets, of which a third is managed for overseas clients – is stressed for the future of the UK economy.
“The UK fund management industry continues to be a world leader at managing overseas assets,” says Anjalika Bardalai, chief economist and head of research at TheCityUK. “However, technological advancements and increasing competition from emerging centres such as Hong Kong and Singapore mean UK fund managers cannot be complacent.”
She calls for an “ambitious and pragmatic Bexit deal” to be secured in order to keep this cutting edge. “Failure to do so will only strengthen existing centres in the US and Japan as well as rising competitors in Asia,” warns Ms Bardalai.
