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Janus CEO warns of uncertainty for liquidity, volatility with a hard Brexit

Joseph Afrane, U.K. opposition Labour Party supporter, center right, holds placards showing display his support for Brexit in London, U.K., on Wednesday, March 27, 2019. U.K. Prime Minister Theresa May aims to put her twice-defeated Brexit deal to another vote this week, amid signs some Brexit hardliners might be willing to back it. Photographer: Luke MacGregor/Bloomberg

A hard Brexit will affect client behavior and risk appetite, warned Richard M. Weil, CEO of Janus Henderson Group, during a media event in London on Wednesday, adding it is not certain what will happen to liquidity, volatility and flows in the event that the U.K. exits the European Union without a deal.

Mr. Weil addressed the ongoing Brexit process, which has been extended until April 12 by EU leaders at Prime Minister's Theresa May request last week: "We have all spent so much time and learned so little. As a business, like every other business, we were forced to plan as if there is going to be a hard Brexit. And we did plan."

"We put extra staff on the ground, we reframed our regulatory approvals, we changed the ownership structure as was appropriate," Mr. Weil said.

Janus Henderson obtained permissions from EU regulators related to managing assets for European Union-based clients for its Luxembourg headquarters.

"We are in position to continue to operate in a relatively uninterrupted way in the case of a hard Brexit," Mr. Weil said.

However, he said Brexit will also have impact on what happens to financial markets and investors.

"I don't think any of us quite know what happens to the capital markets, to liquidity, to valuations and flows in the case of a hard Brexit," Mr. Weil noted.

"There is a huge focus among regulators on forward liquidity." But he said liquidity is hard to predict: "It's there until it isn't," he warned.

Mr. Weil said there could be disruptions to capital markets. "We are in as good a shape as we could be but let's face it, this is unprecedented stuff and none of us could know what will happen in capital markets," he said.

Mr. Weil also cautioned that a no-deal Brexit "will certainly affect client behavior, risk appetite and levels of fear if it happens."

"That's rather hard to forecast," he said.

"None of us thinks that it would be good for our industry, but it's difficult to be specific on client flows," he said.

Commenting on a scenario in which the U.K. exits the European Union in a soft Brexit, Mr. Weil said: "The market is pricing in some sort of a soft Brexit more than a hard Brexit." But he warned the possibilities of the policy are so significant that the U.K. can "accidentally end up on the cliff edge."

"That risk is there," he said.

U.K. members of Parliament will vote Wednesday on a series of proposals, called indicative votes on how the U.K. should exit the European Union, including Ms. May's withdrawal deal, after the voted to take control over the Brexit process from Ms. May on Monday.