Moody’s: Brexit would be workable for asset managers despite profitability hit
A UK vote to leave the European Union would weigh on asset managers’ profitability, according to credit ratings agency Moody’s.
But a note today said a so-called Brexit would not be a “big threat” to their credit fundamentals. It said the “operational and business impact would be manageable for most asset managers we rate”.
Assessing the likely impact of a Brexit vote on asset managers, Moody’s said global firms’ concerns about operations in this context are “mild”, adding: “For smaller or niche asset managers, a Brexit could have more onerous implications.”
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The note said that while a Brexit would be “credit negative for the UK economy”, Moody’s expects “limited negative impact on asset managers’ credit fundamentals”.
In a Brexit scenario, it noted, the UK would have two years to renegotiate its trading and dealing terms with the EU, “which means that no immediate changes are expected for asset managers”.
Moody’s said the operational and business impact would be “manageable for most asset managers we rate” and the loss of management and marketing “passporting rights” associated with the EU would not have “profound implications for the asset management industry overall”.
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But the note added: “Brexit would lead to financial market volatility and weigh on asset managers’ operating margins.
“Volatility in financial markets is likely following a vote by the UK to leave the EU. It would translate into lower industry growth, both from weak market performance and from reduced investor appetite for risk, and would weigh on asset managers’ profitability.
“Non-UK based asset managers would also be affected if such market volatility spreads to continental Europe.”