uk trade & investment: fund management in the uk

Fund management in the UKThe destination of choice for investment management

The UK is the largest fund management centre in Europe and the second largest globally accounting for over 8.4 percent of global funds under management

£6.2trnTotal assets managed in the UK

£2.2trnAssets managed in the UK on behalf of overseas clients

£775bnUK- managed funds domiciled overseas

£770bnManaged in UK authorised funds (OEICs and unit trusts)

FundmanagementintheUK 01

The UK is a leading global financial services centre, and the most internationally-focused financial marketplace in the world.

It is no surprise then, that more overseas financial institutions and investors choose to do business in, and with, the UK than any other country.

Contents

Foreword 02

UKfundmanagement:anintroduction 05

TheUK–yourspringboardtoglobalgrowth 06

SizeoftheUKfundmanagementsector 08

Typesofclients 12

Alternativefunds 14

SovereignWealthFunds 17

GlobalpositionofUK 18

Mostattractivelocationsforrelocating 20

AdvantagesoftheUKasafundmanagementcentre 22

LondonandtheUK 23

BusinesslocationsacrosstheUK 24

UKtaxregime 26

Taxadministration 28

Funddomicile 30

SupportingTradeandInvestment 34

Onestopshop 35

Growingyourbusinessandleveragingopportunitiesinternationally 36

Contacttheteam 37

02 FundmanagementintheUK

Foreword

Financial services are thriving in the UK. We are a leading global financial services centre, and the most internationally-focused financial marketplace in the world.

TheUKhasanunrivalledconcentrationofcapitalandcapabilities,aswellasaregulatorysystemthatiseffective,fairandprincipled.

Nowonderthatmoreoverseasfinancialinstitutionsandinvestorschoosetodobusinessin,andwith,theUKthananyothercountry.TheUKisoneofthelargestmarketsintheworldforfundmanagement,andweremainEurope’sleadingcentreforfundmanagement.TheUKGovernmentiscommittedtostrengtheningtheUK’spositionasaninvestmentdestinationofchoiceforinvestmentmanagers,andwearecommittedtomakingtheUKoneofthemostcompetitiveplacesintheworldfortheinvestmentmanagementsector.

Weareproudthatweareoneofthemostopeneconomiesintheworld.Businessesfromallovertheglobecancomehereandinvest,knowingthattheywillbefreetopursuetheirinterestsinastableandsupportiveenvironment.

Wealreadyhaveastrongoffer.Wehaveatransparentlegalsystemandahighlyskilledandeducatedworkforce,andweareoneofthemostconnectedplacesintheworld.FinancialbusinessintheUKisoverseenbyawell-respectedsecuritiesmarketregulator–theFinancialConductAuthority–soinvestorscanhaveconfidenceinthestrengthandimpartialityofourregulatorysystem.

OurpriorityastheUKGovernmentistobuildonourstrengths.WearecommittedtomakingtheUKoneoftheworld’smostcompetitiveplacesfortheinvestmentmanagementindustry,toattractmorefundmanagerstoourshores,andtocreatetherightenvironmentforthosealreadyheretosucceedandtocapitaliseonglobalopportunities.OpportunitiessuchasthoseinAsia:theUKwasawardedthefirstRQFIIquotaoutsideofGreaterChinainOctober2013,allowingBritish-basedfirmstoinvestdirectlyintoChinesemarkets.


TheUKGovernmentismakingsignificantprogressinourambitiontomaketheUKaglobalcentreforinvestmentmanagement.TheFinancialConductAuthority’sfundauthorisationtimeshavebeenreducedbyaround50percent,followingthelaunchofourUKInvestmentManagementStrategyin2013.ChangestothetaxenvironmentaffectingtheinvestmentmanagementindustryalsomeanthattheUKisnowgloballycompetitive,bothforfundmanagementandasafundsdomicile.

ThisbrochuresetsoutwhywebelievetheUKisagoodplacetomanagefunds,andwhyitalsomakessensetodomicileyourfundhere.UKTrade&Investmentisworkinghand-in-handwithHMTreasury,andinpartnershipwiththeindustry,toensurethattheneedsofinvestorsareunderstood,andtoensurethattheUKGovernmentisabletomeetthoseneeds.

Wehaveanexplicit,long-termcommitmenttothesector,todeveloptheUKintoaworld-classdestination,committedtothesector’ssuccess,andtomaintaintheUK’spositionastheworld’spre-eminentinternationalfinancialcentre.

Dominic JermeyChief Executive, UK Trade & Investment

50%reduction in The Financial Conduct Authority’s fund authorisation times


UK fund management: an introduction

The UK is by far the largest European centre for investment management. Assets under management have increased for the fifth successive year, to a record £6.2 trillion at the end of 2013.

UKTIistheGovernmentdepartmentchargedwithhelpingcompaniessetupintheUKandhelpingthosealreadyheretoexpandinternationally.TheUKTIFinancialServicesOrganisationissetuptoassistfundmanagersseekingtoestablishapresencehereintheUKandtoharnessopportunitiesforthosealreadyhere,inthisimportantandthrivingsector.

AccordingtoTheCityUK,therepresentativebodyfortheUK-basedfinancialandprofessionalservicesindustries,the14percentincreaseduringthelastyearwasduebothtoaninflowofnewfundsandstronginvestmentreturns.

Ofthetotalassetsundermanagement,some£2.2trillionarenowmanagedonbehalfofforeignclients,makingtheUKtheleadingglobalcentrebythismeasure.

TheUKisalsobecomingamoreimportantlocationasafunddomicile.OfthetopfivelocationsintermsoffunddomicileinEurope,theUKsawthebiggestincreaseinassetsin2013.

Nearlytwo-thirdsoffundsundermanagementcamefrominstitutionalclients.Retailclientsgeneratedafurther16percent,withtheremainderaccountedforbyprivateclientfundsandalternativefunds.Inaninternationalcontext,UKfundsundermanagementaccountedfor8.4percentofglobalfundmanagementassets.

Astheleadingglobalcentreforcross-borderfinancialservices,LondonandthewiderUKarewellpositionedtocaptureagrowingshareofbusinessfromtheinternationalmarketswhichofferthegreatestpotentialforgrowth.TheseincludetheBRICnations,GCCcountriesandTurkey,aswellasotherAsianmarketsandLatinAmericaneconomies.

LondoncontinuestodevelopastheglobalhubforRenminbi(RMB)businessoutsideChina,andtheUKcontinuestosupporttheinternationalisationofRMBbytheChineseauthorities.Thefundmanagementsectorwillplayanimportantroleinthis,lendingweighttotheinternationalisationoftheRMB.

UnderstrategicdirectionfromtheTreasury-ledFinancialServicesTrade&InvestmentBoard(FSTIB),UKTrade&Investmentisworking,togetherwithHMTreasury,andinpartnershipwithTheCityUK,theInvestmentManagementAssociation(IMA)andthewiderfundmanagementindustry,toextendthepromotionofthefundmanagementindustryoverseas,andprovidinghands-on,practicalassistancetofundmanagersseekingtoestablishapresenceintheUK.

Sue Langley, OBEChief Executive Officer, UKTI Financial Services Organisation

35%Total of European assets under management that are managed in the UK, December 2012


The UK – your springboard to global growth

The UK is the number-one destination for foreign direct investment in Europe – second in the world only to the USA.

TheUKiswellestablishedasoneoftheworld’smajortradingnations.AccordingtotheCentreforBusinessandEconomicResearch(CEBR),theUKisthesixthlargesteconomyintheworldwithaGDPofaroundUS$2.65trillion(WorldEconomicLeagueTable2013).

TheUKisalsooneoftheleadingbusinesslocationsintheworldandthetopdestinationinEuropeforForeignDirectInvestment.Arichanddiversemarketwithworld-classindustriesincludingLifeSciences,ICT,Creative,FinancialandProfessionalBusinessServices,AerospaceandAutomotiveengineering,theUKoffersanattractivelocationforbusinesseswitheasyaccesstocustomers,productinnovators,suppliersandpartners.

TheUKmaintainsthisleadingpositionbycreatingarangeofhighlyattractiveconditionsforbusinessandinvestment.TheUKGovernment’sPlanforGrowthdrivescoordinatedactionthatseekstocreatethemostcompetitivetaxsystemin

theG20,maketheUKthebestplaceinEuropetostart,financeandgrowabusiness,encourageinvestmentandexportsandcreateahighlyskilledworkforcethatisthemostflexibleinEurope.Thelegalsystemsupportsandprotectsbusinessinterests,andcutstobureaucracyarereducingburdensonbusiness.

ArecentsurveyofinternationalbusinessleadersfoundinvestorconfidenceintheUKisthestrongestinEurope1,whiletheWorldBankhassaiditiseasiertodobusinessherethananyothermajoreconomyinthecontinent.

Withextensiveair,rail,portandroadnetworks,andasamemberoftheEU,theUKprovidesreadymarketaccesstoEurope.TheUKalsohasahighlyskilledworkforceandfourofthetoptenuniversitiesintheworld2.Inaddition,theUKhasaworld-classbusinessinfrastructure,withalegalsystemknowntohandlecommercialdisputes.Englishlawiswidelyusedininternationalcontracts.

Lastyear,UKTIhadahandinmorethan80percentoftheinwardinvestmentprojectslandingintheUK.Andour

servicedoesn’tstoponceyouareestablishedintheUK;itcontinuesasyourbusinessexpandsinternationally,supportingforeigninvestorswiththesamerangeofservicesasanyotherUK-basedcompany–includingsupporttointernationalisearoundtheworld.

1A.T.Kearney2014.ForeignDirectInvestmentConfidenceIndex:ReadyforTakeoff

2QSTopUniversityRankings

Financial gateway to Europe

TheUKrepresentsanidealgatewaytoEurope,whichoffers:

•accesstoover500millionpotentialinvestors

•thesecondlargestfundmanagementmarketintheworld,withmorethan£15trillionofassetsundermanagement

•passportingbenefits:underEUrules,fundmanagerscanregisterfundsinoneMemberStateandthenfreelymarketthemacrossthewholeoftheEU.

Source:TheCityUK


Investmentmanagementisoneofourmostsuccessfulindustries.TheUKisthelargestEuropeancentreforfundmanagementandoneofthelargestcentresglobally,accountingforover8percentoffundsundermanagementaroundtheworld.

Onaglobalscale,theprospectsforinvestmentmanagementarelookinggood.Theindustryisenjoyingrapidgrowth,aspeopleinanemergingglobalmiddleclasslivelonger,saveforthefuture,andwanttoinvest.

Asoneoftheworld’smajortradingnations,andasthemostinternationally-focusedmarketplaceintheworldforfinancialservices,theUKisrecognisedasaspringboardforexportingandforglobalgrowth.FirmsoperatingintheUKbenefitfromoneofthemostopenmarketsintheworldforfundmanagement,puttingtheminaprimepositiontogainnewinternationalbusiness,particularlyinemergingmarketswheregrowthprospectsarestrongest.

TheUKGovernmentisbuildingontheUK’spositionasoneoftheleadingglobalcentresforfundmanagement.ItsInvestmentManagementStrategy,whichwaspublishedinMarch2013,announcedactiontofurtherimprovetheUK’staxationregimeandregulatoryenvironment,and

givesanexplicitlong-termcommitmenttoprovidesupporttothefundmanagementsector.

In2014,theGovernmentalsolaunchedaOneStopShopconciergeserviceforfundmanagerswishingtosetupintheUK.LedbytheUKTrade&InvestmentFinancialServicesOrganisation,theconciergeservicebringstogetheralloftherelevantserviceproviders,toofferacomprehensivepackageofsupporttofundmanagerswhoarenewtothecountry.

•TheUKistheworld’sleadingexporteroffinancialandprofessionalservices,withatradesurplusof$71billionin2013.

•TheUKisthelargestsourceofinsurancefundsandpensionsinEurope.

• Investmentinfinancialtechnology(fintech)isgrowingfasterintheUKandIrelandthananywhereelseintheworld.

•TheUKaccountedfor41percentofglobalforeignexchangetradinginApril2013,wellaheadoftheUSA,JapanandSingapore.TheUKistheleadingWesterncountryandEurope’spremiercentreforIslamicfinance,with$19billioninreportedassets.

•Almosttwo-thirdsofallRMBpaymentsoutsideChinaandHongKongnowtakeplaceinLondon,and28percentofallinternationalRMBpaymentsaremade.

•TheUKhasa12.5percentmarketshareoftotalUCITSassetsbydomicile(sourceEFAMAquarterlyreviewNovember2014a/o30thSeptember)intheUK,themostoutsideHongKongandmainlandChina.

Put simply, if you are an overseas business wanting to drive up

your profitability and increase your

competitiveness, Britain is the place to be.


Size of the UK fund management sectorNot only is the UK’s fund management industry the largest in Europe in absolute terms, it also continues to show strong growth year on year.

TheUKisoneoftheleadinggloballocations,andbyfarthelargestEuropeancentreforfundmanagement.Assetsundermanagementwithintheindustryincreasedforthefifthsuccessiveyear,toarecord£6.2trillionattheendof2013.The14percentincreaseduringtheyearwasduebothtoaninflowofnewfundsandstronginvestmentreturns.Nearlytwo-thirdsoffundsundermanagementcamefrominstitutionalclients–retailclientsgeneratedafurther16percent,withtheremainderaccounted-forbyprivateclientfundsandalternativefunds.

WhileLondoniscentraltotheUK’sstronginternationalposition,otherBritishcities,suchasEdinburgh,Glasgow,Aberdeen,Manchester,Liverpool,CardiffandBirmingham,arealsoimportantcentresforfundmanagement.

Inaglobalcontext,theUKisamajorplayerinthefundmanagementindustry.FundsundermanagementintheUKaccountedfor8.4percentoftotalfundmanagementassetsaroundtheworldattheendof2013,whichgloballyareworthsome$146trillion.

Fund management in the UK 09

Figure 1

Wider asset management industry

UK assets that are managed by Investment Management Association (IMA) members grew by 13 percent during the year, reaching £5 trillion at the end of 2013. £2 trillion of this total was managed on behalf of overseas clients. There was also strong growth over the last year in UK authorised funds, which increased by 16 percent, from £662 billion in 2012 to £770 billion in 2013.


TheIMA’smembersrepresentthemajorityoftheUKassetmanagementindustryintermsofsizeofassets.IncludingthoseassetswhicharenotmanagedbyIMAmembers,itisestimatedthatthevalueoftheentireassetmanagementindustryintheUKisover£6trillion.

Figure 2

Funds under management in the UK (% share of UK funds, end-2013)

£6,193bn

Source: Investment Management Association, TheCityUK estimates

Institutional clients 64%Retail clients 16%Private clients 10%Alternative funds 10%

UK clients Overseas clients

£bn 2012 2013

ManagedbyIMA1membersfirms2 4,389 4,957Institutionalclients

–insurancecompanies–corporatepensionfunds–other(localauthorities,charities,etc.)

3,611987

1,694930

3,9581,0291,8321,098

Retailclients 778 999Otherfunds3 490 598

–Hedgefunds–Propertyfunds–Privateequityfunds

234140117

252217129

Privateclientsfunds 548 638

TotalfundsundermanagementintheUK 5,427 6,1931 InvestmentManagementAssociation2 Excludingprivateclients3 Figureshavebeenadjustedtotakeaccountofdouble-counting

Source:IMA,ComPeer,Eurohedge,BVCA,IPO,TheCityUKestimates

Figure 3

Assets managed in the UK by Domicile (% share of UK funds, end-2013)

£6,193bn Source: TheCityUK estimates basedon Investment Management Association data

UK clients 64%Overseas institutional and retail clients 29%Overseas private clients and alternative funds 7%

Fund management in the UK 11

The UK is the leading centre for fund management in Europe, accounting for 35 percent of assets under management, more than the next two largest centres combined. Globally the UK is second only to the United States.

Figure 4

Assets under management in Europe (December 2012)Country Net assets Market share

1 UK 5,449 35%

2 France 2,977 19%

3 Germany 1,618 10%

4 Italy 841 5%

5 Netherlands 469 3%

6 Belgium 225 1%

7 Other 3,857 26%

Source: EFAMA


Types of clients

UK-based investment management firms manage many different types of funds for a wide range of different clients.

Institutional clientsFundsthataremanagedonbehalfofinstitutionalclients(includinginsurancefunds,pensionfunds,localauthorityandcharityfunds)havebecomeincreasinglypredominantinrecentyears,andcurrentlyaccountforaroundtwo-thirdsofUKfundsundermanagement.AccordingtotheInvestmentManagementAssociation,

pensionfundsremainthelargestofthesetypesoffunds(36percent),followedbyinsurancefunds(20percent).

Retail clientsFundsthataremanagedonbehalfofretailclientsincreasedby28percentin2013,toarecord£999billion.TheoverallfigureforinvestmentfundsmanagedintheUKisaround£1.5trillion,assomeproductsaresoldto

arangeofinstitutionalclients.AroundahalfofthesefundsaredomiciledintheUK.

Private clientsPrivateclientsmakeupasignificantpartoftheUKmarket,withassetsof£638billionattheendof2013.Thisfigureincludesassetsmanagedbyprivateclientfirmssuchasstockbrokers,andprivateclientdepartmentsofbanksandfundmanagers.


36%Pension Funds constitute the largest client type

Pensionfundsremainedthelargestclienttype(36percent)followedbyinsurancecompanies(20percent).Insuranceassetsmanagedin-housecontinuedtofall,astheindustrymovedawayfromthein-housemodelandtowardslessverticallyintegratedstructures.Theoverallretailandinstitutionalsplithasbeenreasonablystablesince2005,averaging20/80.

Figure 7

Assets managed in the UK by client type (2005–2013)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

02005 2006 2007 2008 2009 2010 2011 2012 2013

Pension funds

Insurance

Other institutional

Retail

Private clients

Source: IMA Survey


Alternative funds

London is the second largest global centre for hedge funds, and one of the leading centres for private equity and property funds.

Alternativefundswerewortharound£600billionin2013,accountingforaround10percentofUKfundsundermanagement1.

Withan18percentshare,Londonisthesecondlargestglobalcentreforhedgefunds,andoneoftheleadingcentresforprivateequityandpropertyfunds.Londonisalsoanimportantcentreforsovereignwealthfunds,asaclearinghouseandlocationfromwheresomeofthesefundsaremanaged.

4%of hedge fund institutional capital invested worldwide comes from London-based investors

Hedge funds LondonisthesecondlargestglobalcentreforhedgefundmanagersafterNewYork.Itsshareoftheglobalhedgefundindustrymorethandoubledinthedecadeupto2013to18percent.TheUKisthelargestEuropeancentreforthemanagementofhedgefundswithoverfour-fifthsofEuropeanhedgefundinvestmentsmanagedoutoftheUK.

Hedgefunds’assetsundermanagementintheUKtotalledarecord$2.3trillionattheendof2013,surpassingforthefirsttimethepre-crisispeakin2007.

1Adjustingfordoublecounting


UK Private Equity and Venture Capital PrivateequityfundsmanagedintheUKcurrentlyhavearound£147billionassetsundermanagement,includingaround£48billiondry-powderofwhicharound£20billionisdestinedfortheUK.

PrivateequityfundsmanagedintheUKraised£11.2billionoffundsin2013,nearlydoublethatof2012(£5.9billion).Thevastmajority(around£9billion)ofthisfundraisingcamefromoverseasinvestors–overthreetimeshigherthanthepreviousyear’s£1.7billion.Thebiggestsourcesoffundraisingin2013werepensionfunds(£2.9billion);sovereignwealthfunds(£1.9billion);andfundsoffunds(£1.4billion).

Property FundsAspropertyinvestmenthasbecomesimplerandrealestatehasbecomeamoreattractiveassetclass,thepropertyfundsectorhasseensharpgrowthrecentlywith£63billionworthofUKcommercialrealestate,accountingforathirdofallinstitutionalinvestment,nowbeingheldbyUKcollectiveinvestmentschemes.

Figure 8

Holdings in commercial property by investor type

£bn2013

% change2003-13

% oftotal

Overseas investors 94 129 24

UK institutions (insurancecompanies and pension funds)

75 -16 19

UK collective investment schemes 63 134 16

UK REITs and companies

listed property 55 38 14

UK private property companies 53 6 14

UK other 18 -4 5

UK traditional estates/charities 17 24 4

UK private investors 10 20 3

TOTAL 385 34 100


Sovereign Wealth Funds

The UK is the most internationally focused marketplace in the world accounting for around one-sixth of global Sovereign Wealth Funds’ direct investment since 2005.

TheUK–andLondoninparticular–isanimportantcentreinthemanagementofsovereignwealthfunds’assets,asaclearinghouseandlocationwhereanumberofthesefundsaremanaged.

AnumberoflargeSovereignWealthFunds(SWFs)suchastheKuwaitInvestmentAuthority,BruneiInvestmentAgency,AbuDhabiInvestmentAuthorityandTemasek/GeneralInvestmentCorporationofSingaporehavelocalrepresentativeofficesinLondon.TheInternationalForumofSovereignWealthFunds,agroupof26fundsledbyChina,RussiaandtheGulfStates,hasrelocateditsSecretariatinLondon.

TheUKhasalsobeenamajorrecipientofSWFinvestmentinrecentyears,accountingforaroundone-sixthofglobalSWFs’directinvestmentsince2005.InvestmentsintoUKinfrastructurehavebeenparticularlyprominent.SWFshaveholdingsofUKutilityassetssuchasChinaInvestmentCorporationandAbuDhabiInvestmentAuthority’sinvestmentsinKembleWaterwhichownsThamesWater.

SinceMay2012,UKregisteredGingkoTreeInvestmentLtd,awhollyownedunitofChina’sStateAdministrationofForeignExchange,hasinvestedmorethan$1.6billioninatleastfourdeals,includingawaterutility,studenthousing,andofficebuildingsinLondonandManchester.


Global position of UK

Trends around the world point to continued growth in the fund management industry, and firms basing themselves in the UK are in a good position to make the most of that growth.

TheUKisoneofthemostopenmarketsintheworldforfundmanagement.ThismeansthatUK-basedfirmsarewellpositionedtogainnewinternationalbusiness,particularlyinemergingmarkets,wheregrowthprospectslookstrongest.TheUKGovernmentiscommittedtoensuringthattheUKremainsanopenandcompetitivemarketforinternationalinvestment.

Reformsofstatepensionsystemsaroundtheworld,withincreasedprivatisation,shouldprovideUK-basedfirmswithmorecross-borderinvestmentopportunities.FundmanagersintheUKarealsowellplacedtocontractfurtherbusinessfromexternalappointments,withtheeasingofinvestmentrestrictionsanddiversificationofinternationalfundmanagers’portfolios.

Overthepastfewyears,therehasbeensubstantialrestructuringamongUKfundmanagers,strengtheningtheirinternationallinks.Thereislikelytobefurtherrestructuringgloballyamongthemainfundmanagementfirms,gearedtoexpandingthepoolofresourcesavailable,developingsophisticateddistributionsystemsandimprovingqualityofservice.


UK-basedfirmshaveawell-establishedtrackrecordinthemeasurementofreturns,arecordtheyshouldbeabletousetotheiradvantageinmarketingproductsinemergingeconomies,asthemarketforfundmanagementinthesecountriesdevelops.

AccordingtoTheCityUKestimates,assetsmanagedthroughtheglobalfundmanagementindustryincreasedby13percentin2013to$146trillion,andconsistedof:

•conventionalfunds(pensionfunds,mutualfundsandinsurancefunds)totallingarecord$97.2trillion

•alternativefunds(hedgefunds,privateequityfunds,exchangetradedfundsandsovereignwealthfunds)withover$14trillioninassets,and

•privatewealthfundswith$52.6trillioninassets.

$146trn Value of the global fund management industry in 2013

Figure 9

Conventional funds as percent of GDP

350

300

250

200

150

100

50

0

UK USJa

pan

Fran

ce

Germ

any

World

Mutual funds

Insurance assets

Pension assets

Source: TheCityUK

% of GDP, (by source of funds), 2013

The UK is one of the most open markets in

the world for fund management, meaning that UK-based firms are well positioned to gain

new international business.

Most attractive locations for relocating/expanding asset management operations

5 Sao Paulo

4 New York

1 London

Ranking

1 London 75

2 HongKong 52

3 Singapore 33

4 NewYork 18

5 SaoPaulo 10

6 = Moscow 7

6 = Paris 7

8 Luxembourg 6

9 Geneva 5

10 =Helsinki 4

10 =Shanghai 4

10 =Zurich 4

Source:TheBanker


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2 Hong Kong

3 Singapore


Advantages of the UK as a fund management centre

There are good reasons why the UK is a leading global centre for fund managers, and the top jurisdiction in Europe for funds under management.

•TheUKisaleadingglobalfinancialservicescentreandthesinglemostinternationallyfocusedfinancialmarketplaceintheworld,tradingmoredollarseachdaythanthewholeUS,andtwiceasmanyeurosastheEurozone.

•TheUKfinancialservicesindustrycontinuestoofferanumberofcompellingreasonsforoverseasfirmstoinvest,includingtheUK’sexpertiseandskillsbase,itsrobustlegalandregulatoryframework,itsliquidcapitalmarkets,itstransparencyinfinancialreportinganditsgeographicpositionandlanguage.

•TheUKhasastrongandresponsiveregulatoryenvironmentthatiseffective,

fairandprincipled.TheUKsecuritiesandmarketsregulator,theFinancialConductAuthority(FCA)isinternationallyrenownedforitshighstandardsofinvestorprotection.

•TheUKisveryopentobusinessandoneoftheeasiestplacesintheworldtodobusiness.40percentoftheassetmanagementfirmsinLondonareownedbyoverseasinvestors.Morethanathirdoffunds,orsome£2.2trillion,areheldonbehalfofoverseasinvestors.

•TheUKwasthefirstfinancialcentreoutsideAsiatobeawardedanRenminbiQualifiedForeignInstitutionalInvestor(RQFII)licencebytheChineseAuthorities,allowingRenminbi(RMB)raisedoutsidemainlandChinatobeinvestedonshore.MorethanhalfofalloffshoreRMBtradingnowtakesplaceintheUK.ThatismorethaninallotherRMBcentrescombined.

•FundsthataredomiciledintheUKcantakeadvantageofsome120doubletaxationagreements,morethaninanyothercountry,whichimprovesinvestorreturns.

•TheUKhasastrategicgeographiclocationbeingonthedoorstepofEurope,andwithstronglinkstotheMiddleEast,Asia,Africaandbeyond.

•TheUKhasstate-of-the-artsupportservicesforfront,middleandbackofficefunctionsacrosstheUKregions,makingcostefficienciespossible.

•Wehaveaninnovativeecosystemthatpromotesinnovationandproductdevelopment,forexampleinrelationtoIslamicFinanceandRenminbitrading.

•TheUKhasanunrivalledconcentrationofcapitalandcapabilities;andadeepanddiversetalentpoolthatsupportsallaspectsofthefundmanagementvaluechain.UKfundmanagerscansupportawidevarietyofdifferentinvestmentstylesandstrategies,andhaveaproventrackrecordforinnovation.

•Accesstoawiderrangeofaudiencesandtargetclients,productsandlegalstructures,forexamplethroughinstitutional,retail,UCITSandAIFMD,hedgeandalternativefunds.


London and the UK

In London, the UK can boast the financial capital of the world. But with major financial centres throughout its regions, there is much more to the UK than just its capital city.

AsEurope’sfinancialhub,theUKoffersacompetitiveregimeforalltypesofinvestmentmanagementactivity.Andastheworld’spre-eminentfinancialcentre,moreassetsaremanagedthroughLondonthananywhereelse.

Londonaccountsforover80percentofUK-basedassetsundermanagement,anditisaleadingcentreforservicessuchasadministration,primebrokerage,custodyandauditing.

Londonisthelocationofsomesignificantclustersinthefundmanagementindustry,withconcentrationsofskills,

experienceandexpertise.ButLondonisnottheonlyplaceintheUKwherethisisthecase.Scotland,forexample,hasalsoimproveditspositioninrecentyears:accordingtoScottishFinancialEnterprise,theScottishinvestmentmanagementindustrynowaccountsformanagedfundstotallingaround£800billion.

Indeed,aboutathirdofthosepeoplewhoaredirectlyemployedintheUK’sfundmanagementsectorarelocatedoutsideLondon.ManchesterandLiverpool,withtheirstrongconcentrationsofwealth

managementfirms,arejointlytheUK’sthirdlargestclusterafterEdinburgh.Cardiff,meanwhile,isakeylocationforthepensions,bankingandinsuranceindustries.Birmingham’srelativeproximitytoLondonhasalsoseenitemergeasanimportantcentreforinvestmentmanagement,anchoredbythepresenceofanumberofmajorglobalfundmanagementfirms.

80%London accounts for over 80 percent of UK-based assets under management

24 Fund management in the UK

Business locations across the UK Across the UK are some major centres of expertise and experience in fund management, with regions and cities often having their own particular areas of expertise within the industry.

Scotland Scotland is a renowned centre of excellence in investment management, with its origins dating back to the nineteenth century.

Scotland is home to the global headquarters of some of Europe’s largest fund management companies, as well as the operations of a wide range of international fund management

companies. In addition, there is a strong mix of independent and boutique fund management companies located there.

The strength of the fund management sector in Scotland has also led to the creation of a thriving fund servicing sector, with six of the top 10 largest global fund administration companies having significant operations in Scotland.

Belfast Belfast and the wider region offer a competitive cost base, and the availability of a highly educated workforce has made it a location of choice for a number of the

world’s largest financial and associated professional services firms in recent years. Since 2010, Belfast has also been chosen as a location for centres of excellence by international fund administration firms. The attractiveness of Belfast is likely to increase, as the clustering effect adds to the availability of the skills required by international financial services companies.


BirminghamBirminghamhasastrongandestablishedfinancialservicessectorwiththrivingbanking,legal,professionalandfinancialsupportservicessectors,whilstitsdiversepopulationhasseenitattractarangeofSouthandEastAsianbanks.IthasalsoemergedasanimportantUKcentreforIslamicfinance,anicheareawithconsiderablegrowthpotential.

Cardiff CardiffisthefinancialhubofWales,andakeylocationforthepensions,bankingandinsuranceindustries,aswellasanextremelycompetitiveandcost-effectivecentreof‘near-shoring’,withaworkforceskilledinbackofficeandsupportserviceoperations.Thecityalsohasasizeablefundadministrationpresence.

LeedsWithacombinedfinance,legalandprofessionalservicessectorworth£13billionandover91,000skilledemployeesinbankingalone,LeedsCityRegionisagloballysuccessfulfinancialandprofessionalservicescentre.TheregionistheUK’ssecondlargestcentreforbankingandhometotheBankofEngland’sonlybaseoutsideofLondon(TheCityUK2014).Itisamajorcentreforcorporateandretailfinance,insurance,stockbroking,equity,ventureandriskfinance,andtelephoneandinternet-basedfinancialservices.

LiverpoolLiverpoolisEngland’sleadingwealthmanagementbaseafterLondon,withdeepandextensiveexpertiseinfundmanagement,marketanalysisandsystemsdevelopment,andthecityprovidesanideal,cost-effectivebaseforsuchoperations.

ManchesterTheManchestermetropolitanarearepresentsthesecondlargestfinancialcentreintheUK(CityUK2013),withparticularstrengthsinbanking,insurance,lawandaccountancy,andstrongrepresentationininvestmentmanagement,wealthmanagementandstockbroking.


UK tax regime

An internationally competitive tax regime, the UK has one of the most competitive tax regimes in the world for both funds and asset managers.

TheUKgovernmentiscommittedtocreatingthemostcompetitivetaxregimeintheG20andhasreformedthecorporatetaxsystemtomakeitmoreattractivetointernationalbusiness.TheGovernment’sreformsareshiftingperceptionsoftheUKtaxregime.

21%(20% from 2015) – corporation tax rate in the UK, lower than in France and Germany

Figure 13

How UK domestic tax regime for companies compares

UK France Germany

Corporation Tax Rate 21%(20%fromApril2015)

33.33% 29.58%

WHT on domestic Dividends 0% 30% 25%

Dividend income Exemption

100% 95% 95%

Gain exemption 100% 88% 95%

Tax clearances Yesincertaincircumstances

No No

Source:GrantThorntonUKLLP

With a clear strategy for reform, based on

principles that underpin a modern, transparent, efficient tax system, the

UK provides the certainty needed for long term

financial planning and investment.


UKcompaniesbenefitfromthelowestheadlinerateofcorporationtaxintheG20,andaterritorialtaxsystemthatexemptsdividendsandoverseasbranchprofits.TheUKregimefortaxationoffundshasbeensimplifiedinrecentyearsandreformedtomeettheneedsofinvestorsofthefuture,includingchangestosimplifythetreatmentforoverseasinvestors,andtheintroductionofataxtransparentAuthorisedContractualFund.InvestorsinUKfundscanbenefitfromtheadvantagesoftheUK’staxtreatynetworktoreducetaxespaidelsewhere.

Figure 14

G20 corporation tax rates 2015*

* Based on announced plansSource: KPMG/Global Tax Rates Online

G20 Rank

UK 1

Russia 1

Saudi Arabia 1

Turkey 1

Korea 5

China 6

Indonesia 6

Canada 8

South Africa 9

Mexico 9

Germany 11

Australia 12

Italy 13

India 14

France 15

Brazil 16

Argentina 17

Japan 18

USA 19

20%

20%

20%

20%

24%

25%

25%

26%

28%

28%

29%

30%

31%

32%

33%

34%

35%

38%

40%

20%UK corporation tax rate for 2015 (the lowest in the G20)


Tax administration

HM Revenue & Customs (HMRC) is a respected, world-class organisation and maintains excellent relationships with businesses.

HMRCistheUKGovernmentDepartmentresponsiblefortheadministrationofallaspectsoftheUKtaxsystemforbusinessesandindividuals,includingbothdirectandindirecttaxes.

TheGovernmentrecognisesthatthewayinwhichcorporationtaxisadministeredandcollectedisafundamentalpartofacompetitivetaxregime.

Working collaboratively with business HMRCaimstoworkcollaborativelywithbusinessestoensureacommerciallyawareandefficientrisk-basedapproachtodealingwithbusinesstaxmatters.

HMRC’srelationshipswithlargecorporatetaxpayersaredeliveredthroughCustomerRelationshipManagers(CRMs).

CRMsareencouragedtomeetwithtaxpayerstodiscussanyissuesfacetofaceasopposedtorelyingonlyonwrittencommunication.HMRCaimstobefullytransparentinitsapproachinordertobuildatrustedrelationshipwithbusiness.

Providing certainty HMRCisabletoprovidenon-statutoryclearancestobusinessesonmostmattersofmaterialuncertainty.

HMRCrecognisestheimportanceofspeedofresponsewheretransactionsaremovingquicklyandiscommittedtorespondingtoallclearanceapplicationswithin28days.Fasterresponsescansometimesbeachieved

wherethecommercialbackgroundtoaparticulartransactionmeansthatthisisessential.

FormultinationalsthatareconsideringsettingupintheUKforthefirsttime,HMRC’sdedicatedInwardInvestmentSupportTeamisavailabletoappointaCRMandaddressareasofuncertaintyinadvanceofestablishingaUKpresence.

A principled and robust approach Theprimaryaimofthetaxsystemistoraiserevenue,andthereforeprovidethefiscalstabilitythatisapreconditionforbusinesssuccess.

HMRCtakesaprincipledandrobuststanceagainsttaxavoidance.ArangeofUKanti-avoidancerulesexiststocounteracttheeffectofarrangementsthattrytoexploittaxrulestoachieveunintendedresults.

HMRCworkswithininternationalorganisationstopromotethedevelopmentofsustainabletaxpolicyandadministrationacrosstheglobe.ItisaleadingcontributortotheOECD’sTaxandDevelopmentTaskForceandtheGovernmentsupportsongoingworkbytheOECDonbaseerosionandprofitshifting.

Atthesametime,theGovernmentbelievesthatthecorporatetaxsystemcanbeandisanassetfortheUK.

Key elements of UK tax competitiveness

Tax Administration•Certaintyoftaxpolicy

•Openengagementwithauthorities

•Lowcompliancecosts

•Establishedtaxregime

Domestic tax•Lowheadlinerate

•Taxablebase

• Interestdeductibility

• Incentives

•R&Dandotherindustry-specificreliefs

•Capitalallowances

• Innovation

Cross Border•Treatynetwork

•Dividend,gainsandbranchexemptions

•TargetedControlledForeignCompanies(CFC)rules

• Investmentmanagerexemption**

**TheInvestmentManagementExemption(IME)allowsnon-UKinvestmentfundstoappointaUKbasedinvestmentmanagerwithoutcreatingariskofUKtaxationforthefund.

29FundmanagementintheUK


Fund domicile

While the UK is largely known as a centre for management of international funds, the UK Government is committed to supporting fund managers who choose to domicile in this country.

•ThisisalreadybeingrecognisedbycompaniesthathaveincreasedtheirbusinessintheUK.Ofthetop5locationsintermsoffunddomicileinEurope,theUKsawthebiggestincreaseinassetsin2013(10.9percent),aheadofLuxembourg(9.7percent),Ireland(9.5percent),Germany(9.2percent)andFrance(1.3percent).Attheendof2013,totalassetsundermanagementinUK-domiciledauthorisedfundswere£770billionwithmoreinalternativefunds.

•LuxembourgandIrelandcompeteonfunddomicilebutnotfundmanagement.TheUKisthereforetheonlyhubthatofferstheadvantagesandcostsavingsoflocatingfundmanagementandfunddomicileallinoneplace.

•TheUKGovernmenthascommittedtosimplifyandstreamlinetaxesforthesectorandinvestors.Inparticular,theGovernmentdemonstrateditscommitmentbyabolishingakeytaxthathadaffectedUKdomiciledfundsatanannualcostof£150million.Theabolitionhasbeenwelcomedbytheindustryandinvestorsalike.

•TheGovernmenthasalsoabolishedthestampdutyandStampDutyReserveTaxchargeonthepurchaseofsharesinUKdomiciledexchangetradedfunds.

•Withholdingtaxonincomedistributionfrombondfundshasbeenabolishedforoverseasinvestors.

The UK Government has committed to simplify

and streamline taxes on the sector and investors.


• Inrecognitionoftheneedforanefficientauthorisationprocess,theFinancialConductAuthorityrecentlyannouncedthatitwouldcutitsauthorisationtimeforauthorisedfundsfromsixmonthstoamaximumoftwoorthreedependingonfundtype.

•TheGovernmenthasannounceditsintentiontoconsultonreformstoimproveUKLimitedPartnership

legislationtomoreeffectivelyaccommodatetheirusebyalternativeinvestmentfunds.UKLimitedPartnershipsareusedextensivelyasthelegalformforUKdomiciledalternativeinvestmentfunds,particularlyprivateequity,venturecapital,propertyandinfrastructurefunds,andtheGovernmentiscommittedtoensurethatitremainsthebestvehiclegloballyforthispurpose.

•FundsthataredomiciledintheUKcantakeadvantageofsome120doubletaxationagreements,morethaninanyothercountry.

Figure 15

Industry funds under management (2004–2013)

700

600

500

400

300

200

100

02004 2005

Retail funds under management

2006 2007 2008 2009 2010 2011 2012 2013

Institutional funds under management

£bn

800

Source: IMA Annual Survey 2013–14


Figure 16

Tax comparison of UK, Ireland and Luxembourg as domiciles for UCITS

UK Ireland Luxembourg

Structures ••••

OpenEndedInvestmentCompanyAuthorisedunittrustAuthorisedContractualScheme–co-ownershipAuthorisedContractualScheme–partnership

•

•••

VariableCapitalInvestmentCompanyUnittrustCommonContractualLimitedpartnership

Fund

•

••

Sociétéd’InvestissementàCapitalVariableFondCommundePlacementLimitedpartnership

Taxation of UK individuals

•

•

•

Dividendsupto30.55percent(upto45percentifabondfund)Gainsondisposalaresubjecttocapitalgainstaxupto28percentNowithholdingtaxunlessfundisabondfund(ifso,exemptionsavailableforpensionfunds,corporates,non-residentsandothers).

•

•

••

Dividendsupto30.55percent(upto45percentifabondfund)Gainssameifthefundappliesforreportingstatus.NowithholdingtaxNon-domiciledUKresidentscanbenefitfromtheremittancebasisoftaxationi.e.taxedwhenproceedsareremittedtotheUKratherthanonanarisingbasis.

•

•

••

Dividendsupto30.55percent(upto45percentifabondfund)Gainssameifthefundappliesforreportingstatus.NowithholdingtaxNon-domiciledUKresidentscanbenefitfromtheremittancebasisoftaxationi.e.taxedwhenproceedsareremittedtotheUKratherthanonanarisingbasis.

Fund level tax ••

Exemptfromcapitalgainstax.Subjecttocorporationtaxat20percentontaxableincomebutgenerallynotaxforequityfundsorbondfunds(considercarefullybalancedfundse.g.equitywithsomeholdingsofbonds,cashandderivatives).

• Exemptfromincomecapitalgainstax

and •

•

ExemptfromincomeandcapitalgainstaxLuxembourgtaxd’abonnement(0.01to0.05percent),someexemptions

Investment level tax

• Widetreatyaccessfortax-transparentfunds

non • Sometreatyaccessfortax-transparentfunds

non • Sometreatyaccessfortax-transparentfunds

non

Stamp Duty •n/a–exemptionsnowavailable •n/a •n/a

VAT ‘SpecialInvestmente.g.UCITS

Funds’ ‘SpecialInvestmente.g.UCITS

Funds’ ‘SpecialInvestmente.g.UCITS

Funds’

Source:KPMG


Supporting Trade and Investment

If you are thinking of the UK as a place in which, or from which, to do business, help is available to make the process of setting-up easier.

UKTrade&Investment(UKTI)isaUKnationalgovernmentdepartmentthatoffersfreesupportandindependentadvicetooverseascompanieslookingtoinvestorlocateintheUK.

Withinthat,UKTIFinancialServicesOrganisation(UKTIFSO)offersfullsupportforassetmanagerswishingtoestablishapresenceintheUK.

TheUKTIFSOactsasasinglebodyforcompaniestoengagewith,astheyplantogrowin,and

from,theUK.WhiletheUKTIFSOcoversthefullspectrumoffinancialandprofessionalservices,theFSOfocusesparticularlyonareaswiththegreatestpotentialforfuturegrowthoropportunitiesintheUK,includingassetmanagement,financialtechnology,insurance,backandmiddleoffice,IslamicfinanceandRMBinternationalisation.

the FSO focuses particularly on areas

with the greatest potential for future

growth or opportunities for the UK.


One Stop Shop Concierge Service

A One Stop Shop Concierge Service gives you all the help you need to set up in the UK.

WorkingwithcolleaguesacrossUKTI’soverseasnetwork,theUKTIFinancialServicesOrganisationoffersaOneStopShopConciergeServiceforfundmanagerswishingtosetupintheUK,bringingtogetheraccesstoalloftheserviceprovidersrequiredtoestablishapresencehereintheUK,fromaccountantsandlegaladviserstotheregulatorandGovernment,toprovideacomprehensivepackageofassistance.

TheOneStopShopConciergeServiceprovidesanumberofservicestooverseascompanies.Theseinclude:

• Help navigating the process of setting up an investment management company in the UK,includinghelpinobtainingauthorisationfromtheUKregulatoryauthorities.

• Introductions to the professional services providerswhoareonhandtoassistintheapplicationprocess,aswellastakingyouthroughthepracticalstepsthatacompanyneedstogothroughtoestablishapresenceintheUK,includingregisteringacompany,corporatestructureandopeningabankaccount.

• Accessing market opportunities: helpinternationalcompaniesquantifyandassessmarketopportunitiesintheUKandEurope.

• Access and introductions to the right people: workingwitheveryUKgovernmentdepartmenttosupportbusinesstoaccessavastnetworkofindustryexpertsandlocalpartners.

• Bespoke market research: compilein-depthfactualreportstailoredtoyourneeds,includingmarketentrysupport,researchanddevelopmentcollaborationsandcostanalysis.

• Helping select the best market location:providepracticalhelpwithsiteselectionthroughvisitstolocationsandpremiseswithregionalexpertsonhandtoofferadvice.

• Tax advice:UKTIcanhelpfacilitatetheprovisionofinformationabouttheUKtaxsystem,incentivesandadministrativeprocesses.

• Support with applying for visas and entry to the UK:providepracticalsupportandadviceontheUKimmigrationsystem,howitworksandthedifferentvisacategories.

• Finding top quality staff: guidanceonstaffrecruitmentandlocatingtherequiredskillsbase.

• Ongoing government support: continuedsupportafteryourbusinessisestablishedintheUK,providingassistanceonexpansionandrepresentingyourinterestsingovernment.


Growing your business and leveraging opportunities internationally

Once here, UKTI FSO can also help your business grow internationally.

WeprovideexperttradeadviceandpracticalsupporttoUKbasedcompanieswishingtogrowtheirbusinessoverseas.UKTIhasprofessionaladvisersbothwithintheUKandacrossmorethan100internationalmarkets.Througharangeofuniqueservices,includingparticipationonoutwardmissionsandprovidingbespokemarketintelligence,

wecanhelpcompaniesenteroverseasmarketsandgettogripsquicklywithoverseasbusinesspractice.

Wealsooffersectorandmarketspecificadviceandsupportthrougharangeofon-goinggovernmentinitiativesandbespokeactivities.

Email: [email protected] (from outside the UK):+44 (0)20 7333 5442

Telephone (from inside the UK):0845 539 0419

Contact the team

Karthik IyerAsset Management Sector Lead – UKTI Financial Services Organisation T: +44 (0)20 7215 5158 M: +44 (0)7920 594 671 E: [email protected]

Emma Wegoda Project Manager – Asset Management – UKTI Financial Services Organisation T: +44 (0)20 7215 3925 M: +44 (0)7554 338 630 E: [email protected]

Matt Lister Account Coordinator – UKTI Financial Services Organisation T: +44 (0)20 7215 5152 M: +44 (0)7899 847 623 E: [email protected]

gov.uk/ukti

UKTIUK Trade & Investment is the Government Department that helps UK-based companies succeed in the global economy. We also help overseas companies bring their high-quality investment to the UK’s dynamic economy acknowledged as Europe’s best place from which to succeed in global business.

DisclaimerWhereas every effort has been made to ensure that the information in this document is accurate, neither UK Trade & Investment nor its parent Departments (the Department for Business, Innovation and Skills, and the Foreign and Commonwealth Office) accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned.

© Crown Copyright 2015 You may re-use this information free of charge in any format or medium, strictly in accordance with the terms of the Open Government Licence. To view this licence, visit: www.nationalarchives.gov.uk/doc/open-government-licence or e-mail: [email protected].

Where we have identified any third party copyright information in the material that you wish to use, you will need to obtain permission from the copyright holder(s) concerned.

Any enquiries regarding this material should be sent to us at [email protected] or telephone +44 (0)20 7215 5000. This document is also available on our website at gov.uk/ukti

ProductionThe paper in this document is made from 50 percent recycled waste pulp with 50 percent pulp from well-managed forests. This is a combination of Totally Chlorine Free and Elemental Chlorine Free. The inks are vegetable oil-based and contain resins from plants/trees and the laminate on the cover is sustainable, compostable and can be recycled.

Published January 2015by UK Trade & Investment URN UKTI/14/1234

Image creditsFront cover: © Vladimir Zakharov/Getty, Inside front and inside back cover: © Shomos Uddin/Getty, p03, 08, 14 (top), 15, 23, 25 (BirminghamCardiff, Liverpool, Manchester), 26, 30, 33, and 34: © Oliver Slay/Crown Copyright, p12: © Eva Yim, p13: okeyphotos/Getty, p14 (bottom): © Compassionate Eye Foundation/Getty, p17: © Macie J Noskowski/Getty, p18: © Vladimir Zakharov/Getty, p22: © Credit: Peter Mukherjee/Getty, p24: © iStock, p25 (Leeds): © Chris Thompson/Getty, p28: © Anthony Mayatt/Getty, p29: © andrearoad/Getty, p34: © Macie J Noskowsk/Getty, p35: © Monty Rakusen/Getty, p36: © Jason Hawkes/Getty

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