Money managers in Europe are facing uncertainty related to the impact of new rules on their businesses at a time when the coronavirus-induced recession is taking its toll on revenues.
In the next six to nine months, money managers operating in Europe will fall under new rules around investing, trading, clearing and reporting. But managers say they are still waiting on European lawmakers to clarify the upcoming disclosures regulation relating to sustainable investing and post-Brexit trading and clearing rules. European Union leaders and institutions have been preoccupied with fighting the effects of the pandemic and are yet to confirm many requirements that could significantly alter how managers currently operate in Europe, sources said.
Managers operating in Europe are awaiting rules on how they will access the U.K. market for trading and clearing after Dec. 31. Separately, managers operating in Europe will be required by the European Disclosure Regulation to report how their investment portfolios impact the environment by March 31, 2021.
The uncertainty around these requirements is combined with ongoing challenges and comes as money managers' businesses have to weather a recession, sources added.
"We have changed our outlook for asset managers to negative from stable in March 2020," said Marina Cremonese, London-based vice president and senior analyst at Moody's Investors Service Ltd., in a telephone interview. "Back in December, we had a stable outlook despite the long-term pressure that the industry was facing from fees, increasing regulatory and technology costs, and competition from passive funds," she said. "However, at the same it was still a very profitable and not very leveraged industry."