A study of institutions investing in alternative assets such as private debt, equity, infrastructure and property says that non-UK fund managers are increasingly keen on listing on the LSE over the next 18 months.
A survey of 102 senior executives investing in alternative assets finds that eight out of 10 institutional investors expect a strong rise in non-UK fund managers aiming to list on the London Stock Exchange over the next 18 months.
Such findings, published by Ocorian, a service provider to alternative investment firms, comes at a time when there are calls to make the LSE more attractive internationally as a listing venue. The issue is also political: new UK prime minister Liz Truss has that said she wants to make the City of London more internationally competitive and take advantage of regulatory freedoms since Brexit.
Most of the funds listing growth will come from Europe, closely followed by North America, Ocorian said. The Middle East, Asia and Africa were ranked in third, fourth and fifth place, respectively.
More than 450 investment funds that total over $320 billion in market capitalisation and invest in more than 70 sub-sectors, providing access to a range of asset classes and geographies, are currently listed on the LSE. They include funds in traditional sectors, such as equities, and in alternative asset classes, including royalties, renewable infrastructure, property, and private equity.
According to the research with US and UK institutional investors, the top reason behind this expected growth is overseas fund managers wishing to diversify their investor base. The research shows that fund managers are also increasingly attracted by the growing size of the market and the fact that it is becoming easier to list funds.
However, the results of the study among investors focusing on real estate, private debt and infrastructure reveal that overseas fund managers are likely to face difficulties along the way.
Institutional investors predict that incorporating ESG principles into their operations and investment decisions will be the most difficult challenge facing overseas fund managers launching on the LSE. This is very closely followed by the costs involved in listing, followed by compliance with regulatory and jurisdictional frameworks which was predicted as the third most difficult obstacle to overcome.
Nayan Gala, founder of an investment banking platform, JPIN, has called for the London Stock Exchange’s listings rules to be liberalised in order to avoid being overtaken by global rivals.
A number of banks and asset managers have shifted some business to jurisdictions such as Ireland and Luxembourg to retain access to the European Union, although the exodus hasn’t been a flood as some feared at the time of the Brexit referendum. The EU’s raft of rules, known as MiFID 2 – enacted five years ago – still apply to the UK. According to consultancy EY, the number of Brexit-related staff relocations was revised down to 7,000 over the first quarter of 2022 from 7,400 in the three months to December. EY has been tracking the impact of Brexit since 2016.