Dublin big winner as UK investors place ‘wall of money’ in offshore funds

As much as £62 billion (€72 billion) in capital has been moved to offshore funds by UK investors since the Brexit referendum nearly two years ago, with Dublin has the biggest winner, taking two-thirds of the total.

New figures from fintech company Calastone show Dublin-based funds have seen £42 billion (€48 billion) of net inflows from the UK since June 2016, with Luxembourg receiving £20 billion (€23 billion).

Other jurisdictions saw negligible inflows, Calastone said.

"Dublin and Luxembourg have been the real winners from the UK's decision to quit the EU. Before the Brexit referendum, there was relatively busy two-way trade in offshore funds, but the net amount that flowed offshore was extremely small," said Edward Glyn, Calastone's head of global markets.

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“Since June 2016, the picture has changed completely as a wall of investor money has fled from the UK to Dublin and Luxembourg, where it will remain inside the EU’s regulatory jurisdiction once the UK leaves the union,” he added.

Flows offshore have been across all asset types, Calastone said, reinforcing the notion that it is the choice of jurisdiction inside the EU and outside the UK that is the key determinant, rather than the investment propositions available.

Last month, as the UK edged closer towards a no-deal Brexit following the failure of prime minister Theresa May to win acceptance for her plan, investors placed a net £2.7 billion (€3.1 billion) in EU-based funds, almost three times the amount that flowed into UK regulated funds.

In the past six months, some £9.5 billion (€11 billion) in capital flowed into offshore funds, as against £7.5 billion (€8.7 billion) that went into UK-domiciled ones.

Big political events

“Big political events have clearly influenced investors: flows offshore have risen markedly at key moments of instability connected to the Brexit story. Institutional and high-net-worth individuals are mainly responsible for the trend; smaller retail savers remain focused on UK-domiciled funds, suggesting that more sophisticated investors have the greatest concern about the consequences of Brexit,” said Mr Glyn.

Calastone, a London-based investment funds transaction network, said it arrived at its figures after analysing over a million buy and sell orders every month from January 2015, tracking monies from independent financial advisers, platforms and institutions as they flow into and out of investment funds.

The fintech, which processes over nine million messages and £170 billion (€197 billion) of transactions every month, has 1,800 customers in 40 countries and territories.