A summary of the UK Investment Management Strategy II

24 January 2018

Introduction As the UK withdraws from the European Union, the government believes that now is the right time to renew the 2013 Investment Management Strategy, and broaden its scope beyond fund domicile. This internal paper summarises the UK government’s long-term strategy, to be delivered in collaboration with industry, for ensuring that the UK remains a globally competitive location for asset management. The new strategy builds upon the forward-looking principles and approach adopted in the 2013 Investment Management Strategy and identifies further areas for improvement. The UK government’s overarching objective is to ensure that the UK asset management industry continues to deliver the best possible outcomes for all consumers and businesses, and to further develop the industry’s global brand and world-class reputation. Guiding Principles The government’s approach to the 2013 Investment Management Strategy was underpinned by six core principles. The government has reviewed these principles and while they remain the right ones for the renewed Investment Management Strategy, they have been updated so that they remain relevant to the current economic context:

a long-term approach – the government is committed to providing a stable environment to reinforce both the strength of the sector and the UK’s status as a global centre for asset management
support innovation – the government will look to support innovation within the asset management industry at every opportunity to create an environment that drives economic growth and continues to deliver the best possible outcomes for consumers and businesses
taking the tough decisions – the government is prepared to take the tough decisions necessary to ensure that the asset management industry thrives in the years to come
resourcing – the government will allocate sufficient resources to support the competitiveness of the UK asset management industry, including strategic ministerial engagement
close collaboration across government – HM Treasury is committed to working collaboratively with HM Revenue & Customs (HMRC), the Department for International Trade and other government departments to ensure that the strategy succeeds
working closely in partnership with industry – the government recognises that collaboration with industry is crucial for the long-term success of the sector and will look to industry to deliver many of the core components of this strategic approach, with the support of government where necessaryObjectivesIn developing this Strategy, the government is committed to delivering changes to enhance the asset management industry in the following areas:
enhancing the government, regulator, industry dialogue | The government is committed to strengthening its communication and collaboration with the asset management industry and the regulator to meet shared goals, including through the new Asset Management Taskforce, chaired by the Economic Secretary to the Treasury.
promoting the UK’s competitive and stable tax and regulatory environment | The government recognises the importance of tax and regulation in generating an environment that facilitates innovation and growth, and intends to promote the competitiveness of the UK regime in this area.
strengthening the domestic investment management skills pipeline | The government sees the need to enhance the development of talent, enabling the industry to continue to recruit the brightest and the best from a diverse range of backgrounds from within the UK and around the world
advancing the development of asset management FinTech solutions | The government is determined for the asset management sector to capitalise on the UK’s world-leading status in FinTech to develop innovative solutions to increase cost efficiencies and rapid response mechanisms that can respond to, for example, cyber threats
supporting UK asset managers to be global leaders in innovative investment strategies | The government recognises the opportunity for the UK asset management industry to lead the way in mainstreaming innovative investment strategies to meet changing investor demands and will support the promotion of these initiatives to lay the foundations for long-term growth within the industry.
continuing a coordinated international engagement and trade promotion programme | The government is committed to ensuring that the UK maintains its global pre-eminence for asset management and will continue to work with industry to attract overseas firms to locate in the UK and promote UK firms overseas.

FRMC Observations

This report clearly promotes the current delegation model operated by the FRMC (in particular the portfolio management function), which is robust and well-established and adopts appropriate contractual and regulatory oversight. Furthermore, considering that the UCITS Directive requires UCITS to be EU-domiciled/managed, it is likely that any “UK UCITS” would be considered as a retail AIF under the AIFMD, and, consequently, would need to meet the requirements of the AIFMD’s national private placement regime, or potentially benefit from the passport rules as a third country. The report also highlights recent UK asset management measures, such as the UK asset management market study and the FCA’s recently-introduced asset management authorisation hub, as well as Project Innovate, where the FCA helps innovators to navigate the regulatory system and to reduce barriers. The government also noted that it is important to maintain a competitive tax regime. The government is of the view that the UK offers an attractive tax regime for its UK-domiciled funds. However, it may be expected that the UK asset management industry secures further beneficial changes to the tax rules and enhances the range of UK funds currently available. For any further information, do not hesitate to contact our Legal team: Gregory Nicolas - Director Legal, Compliance & Corporate, Conducting Officer Elizabeth Parker - Legal Counsel Sokayna Mulquin - Legal Counsel

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