Dominic Johnson, the outgoing chair of New City Initiative (NCI) believes that following Brexit, there will be a ‘huge opportunity’ for the UK to develop its own international funds platform.
In an interview with Wealth Manager prior to handing over chairmanship to Jamie Carter last week, Johnson (pictured) warned that if NCI member firms are required to locate resources in mainland Europe because of Brexit, it will be expensive, leading to a reduction in companies offering services.
‘We are pushing the idea of a dual funds regime. Do you want to be regulated in the European way or international way? One of the things we pressed was that you could have duality of regulation. I think there is a huge opportunity for the UK to develop its own international funds platform. Why isn’t London the capital of fund administration services?
‘If we can and with NCI, it would be wonderful to see if we can have a UK fund structure, in the post-Brexit future of Britain,’ he said.
He added that while Brexit will continue to be the focus of attention, politics should not get in the way of ‘sensible economic trade relations’.
NCI was set up in 2010 with five member firms, including Johnson’s Somerset Capital, and has grown to boast 52 members, which run around £400 billion.
‘We couldn’t be entering a better period for boutiques,’ he said. ‘When I assess the fund management industry over the last seven years, NCI competition has been reduced through regulation. NCI did several studies that show that the number of CEOs decreased while compliance officers have increased.
‘The regulatory burden has made it difficult to set up boutiques. Therefore investment management competition hasn’t come from that, it actually came from the passives. Passive management will be a threat to organisations that don’t generate alpha and don’t show true value. [The] good news for NCI is you will have the boutique industry flourishing.’
Johnson said that when NCI was established, considerable resentment about financial services lingered post-financial crisis and fund management was tarred with the same brush. Therefore the group wanted to show that its members, who were structured as partnerships, had a better culture.
Secondly, it wanted to build a relationship with the regulator and legislators to ensure the industry flourished.
‘London is the capital of asset management globally and we were worried excessive regulation would affect that. To some extent heavy regulation has meant that we’ve seen significant slowdown of boutique firms in London, but in the last few years we’ve had momentum. Connecting with regulators to explain our structures and models has really made a difference.
‘I have enjoyed the work I’ve done with NCI. I think we have to work hard over the next year to get our voice heard. There will be a lot of noise around Brexit. But ultimately the trend for the next period is positive for boutique firms.’