Brexit Solutions
Meet the Challenges of Brexit
Asset management firms can meet the product line challenges from Brexit through the adoption of the GFX Global Hub and SpokeSM System for their UK, Luxembourg and Irish umbrella fund ranges. The GFX Global Hub and SpokeSM System is the next generation solution for those firms to efficiently operate a single portfolio with assets from sub-funds sold publicly in the UK (CIS), Europe (UCITS) and elsewhere with the same investment objective and strategy. These ranges of existing or newly-created sub-funds are thus able to replicate and enhance the functionality of a UCITS passport without the limitations of a traditional mirror or parallel fund, a fund re-domiciliation, or reliance on a revocable equivalency designation.
The GFX Global Hub and SpokeSM System is also used across domiciles for different types of traditional or exchange-traded investment funds as well as taxable and tax-exempt separate accounts and banking, insurance, and other investment products, including asset allocation funds.
Although an asset management firm may adopt the GFX Global Hub and SpokeSM System as a Brexit solution, many of the benefits discussed below would apply to other types of investment products and to applications of the GFX Global Hub and SpokeSM System other than Brexit.
The Brexit Challenge to Pan-European Fund Distribution
On March 30, 2019 or at the end of any transition or implementation period thereafter, UK CIS and their sub-funds will cease to be UCITS and thus can no longer be sold to new EU27 retail investors or accept additional investments from current EU27 retail shareholders. Similarly, Luxembourg/Irish UCITS will no longer be automatically available for sale to new UK retail investors or be automatically able to accept additional investments from current UK retail shareholders.
Also, at that same time, UK and EU27 asset allocation and other fund-of-funds which are currently UCITS will need to evaluate their continuing ability to invest in the sub-funds of EU27 UCITS or UK CIS, respectively.
Availability
The GFX Global Hub and SpokeSM System enables the same portfolio to be available on a cost-effective basis to investors across the UK (through a UK CIS) and the EU27 (through a Luxembourg or Irish UCITS) post-Brexit.
This is achieved by creating a new GFX Portfolio for each existing sub-fund of a UK CIS and Luxembourg/Irish UCITS. In situations where there are existing sub-funds in each range with the same investment objective and strategy, this result is achieved directly through the conversion of each sub-fund to the GFX Global Hub and SpokeSM System. In situations where there is no existing sub-fund in one of the ranges, a new sub-fund with the same investment objective and strategy is created in that range using the GFX Global Hub and SpokeSM System to achieve this result.
Current shareholders would maintain their current investments in their current sub-fund and continue to make additional investments in that sub-fund if able to do so. If unable to do so, they would make those additional investments in the corresponding sub-fund in the other range. Thus, all of their investments would be made through the same GFX Portfolio and aggregated for convenience in shareholder statements. The GFX Global Hub and SpokeSM System can be adopted without any required shareholder vote and without any mandatory conversions of prior fund holdings. Shareholders would also not incur any tax liability with respect to either their current or additional investments as a result of transition to the GFX Global Hub and SpokeSM System.