LDN - Business

U.S. asset manager MFS picks Luxembourg as post-Brexit EU hub

[May 09, 2018] By Simon Jessop and Carolyn Cohn

LONDON (Reuters) - U.S. asset manager MFS Investment Management said it will seek permission to create a European Union hub in Luxembourg as it positions itself for Britain's exit from the bloc.

MFS, which is owned by Canadian insurer Sun Life Financial <SLF.TO> and traces its roots to the launch of the first U.S. investment trust in 1924, has yet to make a final decision on the scale of any move, Madeline Forrester, managing director, UK Institutional Business, told Reuters.

The plan, which requires approval from Luxembourg regulators, would see MFS build up its existing Luxembourg office, currently staffed by 7 people, through internal company moves or local hires.

MFS has taken no decision yet on the type of roles to move to Luxembourg or how many.

The company employs 1,900 staff globally, of which around 140 are in Britain, and runs a number of actively managed funds for retail and institutional clients. It said London would remain MFS's main office in Europe after Brexit.

At present, MFS has a Luxembourg fund range with 36 equity, multi-asset and fixed-income sub-funds that are sold primarily into Europe, Britain and Latin America.

Britain's vast financial services looks set to be one of the most divisive areas in the Brexit negotiations, with Britain demanding a generous deal while the EU refuses to shift from its insistence that Britain's red lines -- such as ending the free movement of workers from the EU -- make that impossible.

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Luxembourg's Finance Minister Pierre Gramegna makes a speech at the Association Of The Luxembourg Fund Industry's Asia Roadshow event in Tokyo, Japan January 19, 2018. REUTERS/Kim Kyung-Hoon/File Photo

While a transitional deal between Britain and the EU could create more time for asset managers to determine final plans, most say they are already beginning to take permanent action to open or bulk up operations elsewhere.

"We have to plan for next March [when Britain is set to officially leave the bloc]. That means preparing for the worst, that's the frustrating bit, and we're not the only industry that feels this way, I'm sure," Forrester said.

"We're all investing time and money planning for the most unfavourable outcome. We view this as making a long-term investment in our Luxembourg office, but whatever the result of the final deal, we have to look after our clients and that means preparing for a 'hard' Brexit."

Luxembourg has been among the chief beneficiaries from the uncertainty caused by Brexit, with a number of insurers and asset managers choosing it for their EU base, including Blackstone and Carlyle.

MFS staff roles and numbers in Luxembourg will in large part depend on the Luxembourg regulator and how many employees with investment or risk management responsibility it requires to be based there - a sensitive subject that has already seen the country pitched against rivals such as Dublin.

(Editing by Sinead Cruise and Adrian Croft)

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