UK Trade & Investment: Fund Management in the UK

Fund
management
in the UK
The destination of choice for investment management

The UK is the largest fund
management centre in Europe
and the second largest globally
accounting for over 8.4 percent of
global funds under management
£6.2trn
Total assets managed in the UK
£2.2trn
Assets managed in the UK
on behalf of overseas clients
£775bn
UK-managed funds
domiciled overseas
£770bn
Managed in UK authorised
funds (OEICs and unit trusts)

Fund management in the UK 01
The UK is a leading global
financial services centre,
and the most internationally-
focused financial marketplace
in the world.
It is no surprise then, that more overseas financial
institutions and investors choose to do business in,
and with, the UK than any other country.
Contents
Foreword 02
UK fund management:
an introduction 05
The UK – your springboard
to global growth 06
Size of the UK fund
management sector 08
Types of clients 12
Alternative funds 14
Sovereign Wealth Funds 17
Global position of UK 18
Most attractive locations
for relocating 20
Advantages of the UK as
a fund management centre 22
London and the UK 23
Business locations
across the UK 24
UK tax regime 26
Tax administration 28
Fund domicile 30
Supporting Trade
and Investment 34
One stop shop 35
Growing your business and
leveraging opportunities
internationally 36
Contact the team 37

02 Fund management in the UK
Foreword
Financial services are thriving in the UK.
We are a leading global financial services centre,
and the most internationally-focused financial
marketplace in the world.
The UK has an unrivalled
concentration of capital and
capabilities, as well as a
regulatory system that is
effective, fair and principled.
No wonder that more overseas
financial institutions and
investors choose to do business
in, and with, the UK than any
other country. The UK is one
of the largest markets in the
world for fund management,
and we remain Europe’s leading
centre for fund management.
The UK Government is
committed to strengthening the
UK’s position as an investment
destination of choice for
investment managers, and we
are committed to making the
UK one of the most competitive
places in the world for the
investment management sector.
We are proud that we are one
of the most open economies in
the world. Businesses from all
over the globe can come here
and invest, knowing that they
will be free to pursue their
interests in a stable and
supportive environment.
We already have a strong offer.
We have a transparent legal
system and a highly skilled and
educated workforce, and we are
one of the most connected
places in the world. Financial
business in the UK is overseen
by a well-respected securities
market regulator – the Financial
Conduct Authority – so investors
can have confidence in the
strength and impartiality of
our regulatory system.
Our priority as the UK
Government is to build on our
strengths. We are committed to
making the UK one of the world’s
most competitive places for the
investment management
industry, to attract more fund
managers to our shores, and to
create the right environment for
those already here to succeed
and to capitalise on global
opportunities. Opportunities
such as those in Asia: the UK was
awarded the first RQFII quota
outside of Greater China in
October 2013, allowing British-
based firms to invest directly
into Chinese markets.

The UK Government is making
significant progress in our
ambition to make the UK a
global centre for investment
management. The Financial
Conduct Authority’s fund
authorisation times have been
reduced by around 50 percent,
following the launch of our
UK Investment Management
Strategy in 2013. Changes to
the tax environment affecting
the investment management
industry also mean that the UK
is now globally competitive, both
for fund management and as a
funds domicile.
This brochure sets out why we
believe the UK is a good place
to manage funds, and why it
also makes sense to domicile
your fund here. UK Trade &
Investment is working hand-in-
hand with HM Treasury, and in
partnership with the industry,
to ensure that the needs of
investors are understood, and to
ensure that the UK Government
is able to meet those needs.
We have an explicit, long-term
commitment to the sector, to
develop the UK into a world-class
destination, committed to the
sector’s success, and to maintain
the UK’s position as the world’s
pre-eminent international
financial centre.
Dominic Jermey
Chief Executive,
UK Trade & Investment
50%
reduction in The Financial
Conduct Authority’s fund
authorisation times

UK fund management:
an introduction
The UK is by far the largest European centre for
investment management. Assets under management
have increased for the fifth successive year, to a
record £6.2 trillion at the end of 2013.
UKTI is the Government
department charged with helping
companies set up in the UK and
helping those already here to
expand internationally. The UKTI
Financial Services Organisation
is set up to assist fund managers
seeking to establish a presence
here in the UK and to harness
opportunities for those already
here, in this important and
thriving sector.
According to TheCityUK,
the representative body for
the UK-based financial and
professional services industries,
the 14 percent increase during
the last year was due both to an
inflow of new funds and strong
investment returns.
Of the total assets under
management, some £2.2 trillion
are now managed on behalf of
foreign clients, making the UK
the leading global centre by
this measure.
The UK is also becoming a more
important location as a fund
domicile. Of the top five locations
in terms of fund domicile in

Europe, the UK saw the biggest
increase in assets in 2013.
Nearly two-thirds of funds
under management came from
institutional clients. Retail clients
generated a further 16 percent,
with the remainder accounted
for by private client funds
and alternative funds. In an
international context, UK funds
under management accounted
for 8.4 percent of global fund
management assets.
As the leading global centre for
cross-border financial services,
London and the wider UK are
well positioned to capture a
growing share of business from
the international markets which
offer the greatest potential for
growth. These include the BRIC
nations, GCC countries and
Turkey, as well as other Asian
markets and Latin American
economies.
London continues to develop
as the global hub for Renminbi
(RMB) business outside China,
and the UK continues to support
the internationalisation of RMB
by the Chinese authorities.
The fund management sector
will play an important role in
this, lending weight to the
internationalisation of the RMB.
Under strategic direction from
the Treasury-led Financial
Services Trade & Investment
Board (FSTIB), UK Trade &
Investment is working, together
with HM Treasury, and in
partnership with TheCityUK,
the Investment Management
Association (IMA) and the wider
fund management industry,
to extend the promotion of the
fund management industry
overseas, and providing hands-
on, practical assistance to fund
managers seeking to establish
a presence in the UK.
Sue Langley, OBE
Chief Executive Officer,
UKTI Financial Services
Organisation
35%
Total of European assets under
management that are managed
in the UK, December 2012

The UK – your springboard
to global growth
The UK is the number-one destination for foreign
direct investment in Europe – second in the world
only to the USA.
The UK is well established as
one of the world’s major trading
nations. According to the Centre
for Business and Economic
Research (CEBR), the UK is the
sixth largest economy in the
world with a GDP of around
US$2.65 trillion (World Economic
League Table 2013).
The UK is also one of the leading
business locations in the world
and the top destination in Europe
for Foreign Direct Investment.
A rich and diverse market with
world-class industries including
Life Sciences, ICT, Creative,
Financial and Professional
Business Services, Aerospace
and Automotive engineering,
the UK offers an attractive
location for businesses with
easy access to customers,
product innovators, suppliers
and partners.
The UK maintains this leading
position by creating a range
of highly attractive conditions
for business and investment.
The UK Government’s Plan for
Growth drives coordinated
action that seeks to create the
most competitive tax system in
the G20, make the UK the best
place in Europe to start, finance
and grow a business, encourage
investment and exports and
create a highly skilled workforce
that is the most flexible in
Europe. The legal system
supports and protects business
interests, and cuts to
bureaucracy are reducing
burdens on business.
A recent survey of international
business leaders found investor
confidence in the UK is the
strongest in Europe1
, while the
World Bank has said it is easier to
do business here than any other
major economy in the continent.
With extensive air, rail, port and
road networks, and as a member
of the EU, the UK provides ready
market access to Europe.
The UK also has a highly skilled
workforce and four of the top ten
universities in the world2
. In
addition, the UK has a world-
class business infrastructure,
with a legal system known to
handle commercial disputes.
English law is widely used in
international contracts.
Last year, UKTI had a hand in
more than 80 percent of the
inward investment projects
landing in the UK. And our
service doesn’t stop once you are
established in the UK; it continues
as your business expands
internationally, supporting
foreign investors with the same
range of services as any other
UK-based company – including
support to internationalise
around the world.
1
A.T. Kearney 201 4. Foreign
Direct Investment Confidence
Index: Ready for Take off
2
QS Top University Rankings
Financial gateway
to Europe
The UK represents an
ideal gateway to Europe,
which offers:
• access to over 500 million
potential investors
• the second largest fund
management market in
the world, with more than
£15 trillion of assets
under management
• passporting benefits: under
EU rules, fund managers
can register funds in one
Member State and then
freely market them across
the whole of the EU.
Source: The City UK

Investment management is one
of our most successful industries.
The UK is the largest European
centre for fund management
and one of the largest centres
globally, accounting for over
8 percent of funds under
management around the world.
On a global scale, the prospects
for investment management are
looking good. The industry is
enjoying rapid growth, as people
in an emerging global middle
class live longer, save for the
future, and want to invest.
As one of the world’s major
trading nations, and as the
most internationally-focused
marketplace in the world for
financial services, the UK is
recognised as a springboard for
exporting and for global growth.
Firms operating in the UK
benefit from one of the most
open markets in the world for
fund management, putting
them in a prime position to
gain new international business,
particularly in emerging markets
where growth prospects
are strongest.
The UK Government is building
on the UK’s position as one of the
leading global centres for fund
management. Its Investment
Management Strategy, which
was published in March 2013,
announced action to further
improve the UK’s taxation regime
and regulatory environment, and
gives an explicit long-term
commitment to provide support
to the fund management sector.
In 2014, the Government also
launched a One Stop Shop
concierge service for fund
managers wishing to set up in
the UK. Led by the UK Trade &
Investment Financial Services
Organisation, the concierge
service brings together all of the
relevant service providers, to
offer a comprehensive package
of support to fund managers
who are new to the country.
• The UK is the world’s leading
exporter of financial and
professional services, with
a trade surplus of $71 billion
in 2013.
• The UK is the largest source
of insurance funds and
pensions in Europe.
• Investment in financial
technology (fintech) is
growing faster in the UK
and Ireland than anywhere
else in the world.
• The UK accounted for
41 percent of global foreign
exchange trading in April
2013, well ahead of the USA,
Japan and Singapore. The UK
is the leading Western
country and Europe’s
premier centre for Islamic
finance, with $19 billion in
reported assets.
• Almost two-thirds of all RMB
payments outside China and
Hong Kong now take place in
London, and 28 percent of all
international RMB payments
are made.
• The UK has a 12.5 percent
market share of total UCITS
assets by domicile (source
EFAMA quarterly review
November 2014 a/o 30th
September) in the UK, the
most outside Hong Kong and
mainland China.
Put simply, if you are
an overseas business
wanting to drive up
your profitability and
increase your
competitiveness,
Britain is the place to be.

Size of the UK fund
management sector
Not only is the UK’s fund management industry
the largest in Europe in absolute terms, it also
continues to show strong growth year on year.
The UK is one of the leading
global locations, and by far the
largest European centre for fund
management. Assets under
management within the industry
increased for the fifth successive
year, to a record £6.2 trillion at
the end of 2013. The 14 percent
increase during the year was due
both to an inflow of new funds
and strong investment returns.
Nearly two-thirds of funds under
management came from
institutional clients – retail clients
generated a further 16 percent,
with the remainder accounted-
for by private client funds and
alternative funds.
While London is central to
the UK’s strong international
position, other British cities,
such as Edinburgh, Glasgow,
Aberdeen, Manchester,
Liverpool, Cardiff and
Birmingham, are also important
centres for fund management.
In a global context, the UK is
a major player in the fund
management industry. Funds
under management in the UK
accounted for 8.4 percent of
total fund management assets
around the world at the end of
2013, which globally are worth
some $146 trillion.

Figure 1
Wider asset management industry
UK assets that are managed
by Investment Management
Association (IMA) members
grew by 13 percent during the
year, reaching £5 trillion at the
end of 2013. £2 trillion of this
total was managed on behalf
of overseas clients. There was
also strong growth over the last
year in UK authorised funds,
which increased by 16 percent,
from £662 billion in 2012 to
£770 billion in 2013.

The IMA’s members represent
the majority of the UK asset
management industry in terms
of size of assets. Including those
assets which are not managed by
IMA members, it is estimated
that the value of the entire asset
management industry in the UK
is over £6 trillion.
Figure 2
Funds under management in the UK
(% share of UK funds, end-2013)
£6,193bn
Source: Investment Management
Association, TheCityUK estimates
Institutional clients 64%
Retail clients 16%
Private clients 10%
Alternative funds 10%
UK clients Overseas clients
£bn 2012 2013
Managed by IMA1
members firms2
4,389 4,957
Institutional clients
– insurance companies
– corporate pension funds
– other (local authorities, charities, etc.)
3,611
987
1,694
930
3,958
1,029
1,832
1,098
Retail clients 778 999
Other funds3
490 598
– Hedge funds
– Property funds
– Private equity funds
234
140
117
252
217
129
Private clients funds 548 638
Total funds under management in the UK 5,427 6,193
1
Investment Management Association
2
Excluding private clients
3
Figures have been adjusted to take account of double-counting
Source: IMA, ComPeer, Eurohedge, BVCA, IPO, TheCityUK estimates
Figure 3
Assets managed in the UK by Domicile
(% share of UK funds, end-2013)
£6,193bn Source: TheCityUK estimates based
on Investment Management Association data
UK clients 64%
Overseas institutional and
retail clients 29%
Overseas private clients and
alternative funds 7%

The UK is the leading centre for
fund management in Europe,
accounting for 35 percent of
assets under management, more
than the next two largest centres
combined. Globally the UK is
second only to the United States.
Figure 4
Assets under management in Europe
(December 2012)
Country Net assets Market share
1 UK 5,449 35%
2 France 2,977 19%
3 Germany 1,618 10%
4 Italy 841 5%
5 Netherlands 469 3%
6 Belgium 225 1%
7 Other 3,857 26%
Source: EFAMA

Types of clients
UK-based investment management firms
manage many different types of funds for
a wide range of different clients.
Institutional clients
Funds that are managed on
behalf of institutional clients
(including insurance funds,
pension funds, local authority
and charity funds) have become
increasingly predominant in
recent years, and currently
account for around two-thirds
of UK funds under management.
According to the Investment
Management Association,
pension funds remain the
largest of these types of funds
(36 percent), followed by
insurance funds (20 percent).
Retail clients
Funds that are managed on
behalf of retail clients increased
by 28 percent in 2013, to a record
£999 billion. The overall figure
for investment funds managed
in the UK is around £1.5 trillion,
as some products are sold to
a range of institutional clients.
Around a half of these funds
are domiciled in the UK.
Private clients
Private clients make up a
significant part of the UK market,
with assets of £638 billion at the
end of 2013. This figure includes
assets managed by private client
firms such as stockbrokers, and
private client departments of
banks and fund managers.

36%
Pension Funds constitute
the largest client type
Pension funds remained the
largest client type (36 percent)
followed by insurance companies
(20 percent). Insurance assets
managed in-house continued to
fall, as the industry moved away
from the in-house model and
towards less vertically integrated
structures. The overall retail
and institutional split has been
reasonably stable since 2005,
averaging 20/80.
Figure 7
Assets managed in the UK by client type
(2005–2013)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
Pension funds
Insurance
Other institutional
Retail
Private clients
Source: IMA Survey

Alternative funds
London is the second largest global centre for
hedge funds, and one of the leading centres
for private equity and property funds.
Alternative funds were worth
around £600 billion in 2013,
accounting for around
10 percent of UK funds under
management1
.
With an 18 percent share, London
is the second largest global
centre for hedge funds, and one
of the leading centres for private
equity and property funds.
London is also an important
centre for sovereign wealth
funds, as a clearing house and
location from where some
of these funds are managed.
4%
of hedge fund institutional
capital invested worldwide
comes from London-based
investors
Hedge funds
London is the second largest
global centre for hedge fund
managers after New York. Its
share of the global hedge fund
industry more than doubled
in the decade up to 2013 to
18 percent. The UK is the largest
European centre for the
management of hedge funds
with over four-fifths of European
hedge fund investments
managed out of the UK.
Hedge funds’ assets under
management in the UK totalled
a record $2.3 trillion at the end
of 2013, surpassing for the first
time the pre-crisis peak in 2007.
1
Adjusting for double counting

UK Private Equity
and Venture Capital
Private equity funds managed
in the UK currently have
around £147 billion assets under
management, including around
£48 billion dry-powder of which
around £20 billion is destined for
the UK.
Private equity funds managed
in the UK raised £11.2 billion of
funds in 2013, nearly double that
of 2012 (£5.9 billion). The vast
majority (around £9 billion) of
this fundraising came from
overseas investors – over three
times higher than the previous
year’s £1.7 billion. The biggest
sources of fundraising in 2013
were pension funds (£2.9 billion);
sovereign wealth funds
(£1.9 billion); and funds of
funds (£1.4 billion).
Property Funds
As property investment has
become simpler and real estate
has become a more attractive
asset class, the property fund
sector has seen sharp growth
recently with £63 billion worth
of UK commercial real estate,
accounting for a third of all
institutional investment, now
being held by UK collective
investment schemes.
Figure 8
Holdings in commercial property
by investor type
£bn
2013
% change
2003-13
% of
total
Overseas investors 94 129 24
UK institutions (insurance
companies and pension funds)
75 -16 19
UK collective investment schemes 63 134 16
UK REITs and
companies
listed property 55 38 14
UK private property companies 53 6 14
UK other 18 -4 5
UK traditional estates/charities 17 24 4
UK private investors 10 20 3
TOTAL 385 34 100

Sovereign Wealth Funds
The UK is the most internationally focused
marketplace in the world accounting for
around one-sixth of global Sovereign Wealth
Funds’ direct investment since 2005.
The UK – and London in
particular – is an important
centre in the management of
sovereign wealth funds’ assets,
as a clearing house and location
where a number of these funds
are managed.
A number of large Sovereign
Wealth Funds (SWFs) such as
the Kuwait Investment Authority,
Brunei Investment Agency, Abu
Dhabi Investment Authority and
Temasek/General Investment
Corporation of Singapore have
local representative offices
in London. The International
Forum of Sovereign Wealth
Funds, a group of 26 funds led
by China, Russia and the Gulf
States, has relocated its
Secretariat in London.
The UK has also been a major
recipient of SWF investment in
recent years, accounting for
around one-sixth of global SWFs’
direct investment since 2005.
Investments into UK
infrastructure have been
particularly prominent. SWFs
have holdings of UK utility assets
such as China Investment
Corporation and Abu Dhabi
Investment Authority’s
investments in Kemble Water
which owns Thames Water.
Since May 2012, UK registered
Gingko Tree Investment Ltd,
a wholly owned unit of China’s
State Administration of Foreign
Exchange, has invested more
than $1.6 billion in at least
four deals, including a water
utility, student housing, and
office buildings in London
and Manchester.

Global position of UK
Trends around the world point to continued
growth in the fund management industry, and
firms basing themselves in the UK are in a
good position to make the most of that growth.
The UK is one of the most
open markets in the world
for fund management. This
means that UK-based firms
are well positioned to gain
new international business,
particularly in emerging
markets, where growth
prospects look strongest. The
UK Government is committed
to ensuring that the UK remains
an open and competitive market
for international investment.
Reforms of state pension
systems around the world, with
increased privatisation, should
provide UK-based firms with
more cross-border investment
opportunities. Fund managers
in the UK are also well placed
to contract further business from
external appointments, with the
easing of investment restrictions
and diversification of international
fund managers’ portfolios.
Over the past few years,
there has been substantial
restructuring among UK fund
managers, strengthening their
international links. There is
likely to be further restructuring
globally among the main fund
management firms, geared
to expanding the pool of
resources available, developing
sophisticated distribution
systems and improving quality
of service.

UK-based firms have a well-
established track record in the
measurement of returns, a record
they should be able to use to their
advantage in marketing products
in emerging economies, as the
market for fund management
in these countries develops.
According to TheCityUK
estimates, assets managed
through the global fund
management industry increased
by 13 percent in 2013 to
$146 trillion, and consisted of:
• conventional funds (pension
funds, mutual funds and
insurance funds) totalling a
record $97.2 trillion
• alternative funds (hedge funds,
private equity funds, exchange
traded funds and sovereign
wealth funds) with over
$14 trillion in assets, and
• private wealth funds with
$52.6 trillion in assets.
$146trn
Value of the global fund
management industry
in 2013
Figure 9
Conventional funds as percent of GDP
350
300
250
200
150
100
50
0
UK
US
Japan
France
Germ
any
W
orld
Mutual funds
Insurance assets
Pension assets
Source: TheCityUK
% of GDP, (by source of funds), 2013
The UK is one of the
most open markets in
the world for fund
management, meaning
that UK-based firms are
well positioned to gain
new international
business.

Most attractive locations
for relocating/expanding
asset management operations
5 Sao Paulo
4 New York
1 London
Ranking
1 London 75
2 Hong Kong 52
3 Singapore 33
4 New York 18
5 Sao Paulo 10
6 = Moscow 7
6 = Paris 7
8 Luxembourg 6
9 Geneva 5
10 = Helsinki 4
10 = Shanghai 4
10 = Zurich 4
Source: The Banker

FFFuuunnnd md md maaannnaaagggeeemmmeeennnt it it in tn tn thhhe Ue Ue UKKK 212121
2 Hong Kong
3 Singapore

Advantages of the UK as
a fund management centre
There are good reasons why the UK is a
leading global centre for fund managers,
and the top jurisdiction in Europe for funds
under management.
• The UK is a leading global
financial services centre and
the single most internationally
focused financial marketplace
in the world, trading more
dollars each day than the whole
US, and twice as many euros as
the Eurozone.
• The UK financial services
industry continues to offer a
number of compelling reasons
for overseas firms to invest,
including the UK’s expertise
and skills base, its robust legal
and regulatory framework, its
liquid capital markets, its
transparency in financial
reporting and its geographic
position and language.
• The UK has a strong and
responsive regulatory
environment that is effective,
fair and principled. The UK
securities and markets
regulator, the Financial
Conduct Authority (FCA) is
internationally renowned
for its high standards of
investor protection.
• The UK is very open to
business and one of the
easiest places in the world to
do business. 40 percent of the
asset management firms in
London are owned by overseas
investors. More than a third
of funds, or some £2.2 trillion,
are held on behalf of
overseas investors.
• The UK was the first financial
centre outside Asia to be
awarded an Renminbi Qualified
Foreign Institutional Investor
(RQFII) licence by the Chinese
Authorities, allowing Renminbi
(RMB) raised outside mainland
China to be invested onshore.
More than half of all offshore
RMB trading now takes place in
the UK. That is more than in all
other RMB centres combined.
• Funds that are domiciled in
the UK can take advantage of
some 120 double taxation
agreements, more than in any
other country, which improves
investor returns.
• The UK has a strategic
geographic location being on
the doorstep of Europe, and
with strong links to the Middle
East, Asia, Africa and beyond.
• The UK has state-of-the-art
support services for front,
middle and back office
functions across the UK
regions, making cost
efficiencies possible.
• We have an innovative
ecosystem that promotes
innovation and product
development, for example
in relation to Islamic Finance
and Renminbi trading.
• The UK has an unrivalled
concentration of capital and
capabilities; and a deep
and diverse talent pool that
supports all aspects of the
fund management value
chain. UK fund managers can
support a wide variety of
different investment styles and
strategies, and have a proven
track record for innovation.
• Access to a wider range of
audiences and target clients,
products and legal structures,
for example through
institutional, retail, UCITS
and AIFMD, hedge and
alternative funds.

London and the UK
In London, the UK can boast the financial capital
of the world. But with major financial centres
throughout its regions, there is much more to the
UK than just its capital city.
As Europe’s financial hub,
the UK offers a competitive
regime for all types of
investment management activity.
And as the world’s pre-eminent
financial centre, more assets
are managed through London
than anywhere else.
London accounts for over
80 percent of UK-based assets
under management, and it is
a leading centre for services
such as administration, prime
brokerage, custody and auditing.
London is the location of some
significant clusters in the fund
management industry, with
concentrations of skills,
experience and expertise. But
London is not the only place in
the UK where this is the case.
Scotland, for example, has also
improved its position in recent
years: according to Scottish
Financial Enterprise, the Scottish
investment management
industry now accounts for
managed funds totalling
around £800 billion.
Indeed, about a third of those
people who are directly employed
in the UK’s fund management
sector are located outside
London. Manchester and
Liverpool, with their strong
concentrations of wealth
management firms, are jointly
the UK’s third largest cluster after
Edinburgh. Cardiff, meanwhile,
is a key location for the pensions,
banking and insurance industries.
Birmingham’s relative proximity
to London has also seen it
emerge as an important centre
for investment management,
anchored by the presence of a
number of major global fund
management firms.
80%
London accounts for over
80 percent of UK-based
assets under management

Business locations
across the UK
Across the UK are some major centres of
expertise and experience in fund management,
with regions and cities often having their own
particular areas of expertise within the industry.
Scotland
Scotland is a renowned centre
of excellence in investment
management, with its origins
dating back to the nineteenth
century.
Scotland is home to the global
headquarters of some of Europe’s
largest fund management
companies, as well as the
operations of a wide range of
international fund management
companies. In addition, there is
a strong mix of independent and
boutique fund management
companies located there.
The strength of the fund
management sector in Scotland
has also led to the creation of a
thriving fund servicing sector,
with six of the top 10 largest
global fund administration
companies having significant
operations in Scotland.
Belfast
Belfast and the wider region offer
a competitive cost base, and the
availability of a highly educated
workforce has made it a location
of choice for a number of the
world’s largest financial and
associated professional services
firms in recent years. Since 2010,
Belfast has also been chosen as a
location for centres of excellence
by international fund
administration firms. The
attractiveness of Belfast is likely
to increase, as the clustering
effect adds to the availability of
the skills required by international
financial services companies.

Birmingham
Birmingham has a strong and
established financial services
sector with thriving banking,
legal, professional and financial
support services sectors, whilst
its diverse population has seen it
attract a range of South and East
Asian banks. It has also emerged
as an important UK centre for
Islamic finance, a niche area with
considerable growth potential.
Cardiff
Cardiff is the financial hub of
Wales, and a key location for
the pensions, banking and
insurance industries, as well as
an extremely competitive and
cost-effective centre of ‘near-
shoring’, with a workforce skilled
in back office and support
service operations. The city
also has a sizeable fund
administration presence.
Leeds
With a combined finance, legal
and professional services sector
worth £13 billion and over 91,000
skilled employees in banking
alone, Leeds City Region is a
globally successful financial and
professional services centre. The
region is the UK’s second largest
centre for banking and home to
the Bank of England’s only base
outside of London (TheCityUK
2014). It is a major centre for
corporate and retail finance,
insurance, stockbroking, equity,
venture and risk finance, and
telephone and internet-based
financial services.
Liverpool
Liverpool is England’s leading
wealth management base after
London, with deep and extensive
expertise in fund management,
market analysis and systems
development, and the city
provides an ideal, cost-effective
base for such operations.
Manchester
The Manchester metropolitan
area represents the second
largest financial centre in the UK
(CityUK2013), with particular
strengths in banking, insurance,
law and accountancy, and
strong representation in
investment management, wealth
management and stockbroking.

UK tax regime
An internationally competitive tax regime,
the UK has one of the most competitive tax
regimes in the world for both funds and
asset managers.
The UK government is
committed to creating the most
competitive tax regime in the
G20 and has reformed the
corporate tax system to make it
more attractive to international
business. The Government’s
reforms are shifting perceptions
of the UK tax regime.
21%
(20% from 2015) – corporation
tax rate in the UK, lower than
in France and Germany
Figure 13
How UK domestic tax regime for
companies compares
UK France Germany
Corporation Tax Rate 21% (20% from
April 2015)
33.33% 29.58%
WHT on domestic Dividends 0% 30% 25%
Dividend income
Exemption
100% 95% 95%
Gain exemption 100% 88% 95%
Tax clearances Yes in certain
circumstances
No No
Source: Grant Thornton UK LLP
With a clear strategy
for reform, based on
principles that underpin
a modern, transparent,
efficient tax system, the
UK provides the certainty
needed for long term
financial planning
and investment.

UK companies benefit from
the lowest headline rate of
corporation tax in the G20,
and a territorial tax system
that exempts dividends and
overseas branch profits.
The UK regime for taxation of
funds has been simplified in
recent years and reformed to
meet the needs of investors
of the future, including changes
to simplify the treatment for
overseas investors, and the
introduction of a tax transparent
Authorised Contractual Fund.
Investors in UK funds can benefit
from the advantages of the
UK’s tax treaty network to
reduce taxes paid elsewhere.
Figure 14
G20 corporation tax rates 2015*
* Based on announced plans
Source: KPMG/Global Tax Rates Online
G20 Rank
UK 1
Russia 1
Saudi Arabia 1
Turkey 1
Korea 5
China 6
Indonesia 6
Canada 8
South Africa 9
Mexico 9
Germany 11
Australia 12
Italy 13
India 14
France 15
Brazil 16
Argentina 17
Japan 18
USA 19
20%
20%
20%
20%
24%
25%
25%
26%
28%
28%
29%
30%
31%
32%
33%
34%
35%
38%
40%
20%
UK corporation tax rate for
2015 (the lowest in the G20)

Tax administration
HM Revenue & Customs (HMRC) is a respected,
world-class organisation and maintains excellent
relationships with businesses.
HMRC is the UK Government
Department responsible for the
administration of all aspects of
the UK tax system for businesses
and individuals, including both
direct and indirect taxes.
The Government recognises that
the way in which corporation tax
is administered and collected is
a fundamental part of a
competitive tax regime.
Working collaboratively
with business
HMRC aims to work collaboratively
with businesses to ensure a
commercially aware and efficient
risk-based approach to dealing
with business tax matters.
HMRC’s relationships with
large corporate taxpayers are
delivered through Customer
Relationship Managers (CRMs).
CRMs are encouraged to meet
with taxpayers to discuss any
issues face to face as opposed
to relying only on written
communication. HMRC aims
to be fully transparent in
its approach in order to
build a trusted relationship
with business.
Providing certainty
HMRC is able to provide
non-statutory clearances to
businesses on most matters
of material uncertainty.
HMRC recognises the importance
of speed of response where
transactions are moving quickly
and is committed to responding
to all clearance applications
within 28 days. Faster responses
can sometimes be achieved
where the commercial
background to a particular
transaction means that this
is essential.
For multinationals that are
considering setting up in the
UK for the first time, HMRC’s
dedicated Inward Investment
Support Team is available to
appoint a CRM and address areas
of uncertainty in advance of
establishing a UK presence.

A principled and robust
approach
The primary aim of the tax
system is to raise revenue, and
therefore provide the fiscal
stability that is a precondition
for business success.
HMRC takes a principled and
robust stance against tax
avoidance. A range of UK
anti-avoidance rules exists
to counteract the effect of
arrangements that try to
exploit tax rules to achieve
unintended results.
HMRC works within international
organisations to promote the
development of sustainable
tax policy and administration
across the globe. It is a leading
contributor to the OECD’s Tax
and Development Task Force
and the Government supports
ongoing work by the OECD on
base erosion and profit shifting.
At the same time, the
Government believes that the
corporate tax system can be
and is an asset for the UK.
Key elements of UK tax
competitiveness
Tax Administration
• Certainty of tax policy
• Open engagement with
authorities
• Low compliance costs
• Established tax regime
Domestic tax
• Low headline rate
• Taxable base
• Interest deductibility
• Incentives
• R&D and other industry-
specific reliefs
• Capital allowances
• Innovation
Cross Border
• Treaty network
• Dividend, gains and branch
exemptions
• Targeted Controlled Foreign
Companies (CFC) rules
• Investment manager
exemption**
**The Investment Management
Exemption (IME) allows non-UK
investment funds to appoint
a UK based investment manager
without creating a risk of UK
taxation for the fund.
29Fund management in the UK

Fund domicile
While the UK is largely known as a centre
for management of international funds, the UK
Government is committed to supporting fund
managers who choose to domicile in this country.
• This is already being
recognised by companies that
have increased their business
in the UK. Of the top 5 locations
in terms of fund domicile in
Europe, the UK saw the biggest
increase in assets in 2013
(10.9 percent), ahead of
Luxembourg (9.7 percent),
Ireland (9.5 percent), Germany
(9.2 percent) and France
(1.3 percent). At the end of 2013,
total assets under management
in UK-domiciled authorised
funds were £770 billion with
more in alternative funds.
• Luxembourg and Ireland
compete on fund domicile but
not fund management. The UK
is therefore the only hub that
offers the advantages and
cost savings of locating fund
management and fund domicile
all in one place.
• The UK Government has
committed to simplify and
streamline taxes for the sector
and investors. In particular, the
Government demonstrated its
commitment by abolishing a
key tax that had affected UK
domiciled funds at an annual
cost of £150 million. The
abolition has been welcomed by
the industry and investors alike.
• The Government has also
abolished the stamp duty
and Stamp Duty Reserve
Tax charge on the purchase
of shares in UK domiciled
exchange traded funds.
• Withholding tax on income
distribution from bond funds
has been abolished for
overseas investors.
The UK Government has
committed to simplify
and streamline taxes on
the sector and investors.

• In recognition of the need for
an efficient authorisation
process, the Financial
Conduct Authority recently
announced that it would
cut its authorisation time for
authorised funds from six
months to a maximum of two or
three depending on fund type.
• The Government has
announced its intention to
consult on reforms to improve
UK Limited Partnership
legislation to more effectively
accommodate their use by
alternative investment funds.
UK Limited Partnerships are
used extensively as the legal
form for UK domiciled
alternative investment funds,
particularly private equity,
venture capital, property and
infrastructure funds, and the
Government is committed to
ensure that it remains the best
vehicle globally for this purpose.
• Funds that are domiciled in
the UK can take advantage
of some 120 double taxation
agreements, more than in any
other country.
Figure 15
Industry funds under management (2004–2013)
700
600
500
400
300
200
100
0
2004 2005
Retail funds under management
2006 2007 2008 2009 2010 2011 2012 2013
Institutional funds under management
£bn
800
Source: IMA Annual Survey 2013–14

Figure 16
Tax comparison of UK, Ireland and Luxembourg as domiciles for UCITS
UK Ireland Luxembourg
Structures •

•
•

•

Open Ended Investment
Company
Authorised unit trust
Authorised Contractual
Scheme – co-ownership
Authorised Contractual
Scheme – partnership

•
•
•
•
Variable Capital
Investment Company
Unit trust
Common Contractual
Limited partnership
Fund
•
•
•
Société d’Investissement
à Capital Variable
Fond Commun de Placement
Limited partnership
Taxation of
UK individuals
•
•
•
Dividends up to 30.55 percent
(up to 45 percent if a
bond fund)
Gains on disposal are subject
to capital gains tax up to
28 percent
No withholding tax unless
fund is a bond fund (if so,
exemptions available for
pension funds, corporates,
non-residents and others).
•
•
•
•
Dividends up to 30.55
percent (up to 45 percent
if a bond fund)
Gains same if the fund applies
for reporting status.
No withholding tax
Non-domiciled UK residents
can benefit from the
remittance basis of taxation
i.e. taxed when proceeds are
remitted to the UK rather than
on an arising basis.
•
•
•
•
Dividends up to 30.55 percent
(up to 45 percent if a bond
fund)
Gains same if the fund applies
for reporting status.
No withholding tax
Non-domiciled UK residents
can benefit from the
remittance basis of taxation
i.e. taxed when proceeds are
remitted to the UK rather
than on an arising basis.

Fund level tax •
•
Exempt from capital gains tax.
Subject to corporation tax at
20 percent on taxable income
but generally no tax for equity
funds or bond funds (consider
carefully balanced funds e.g.
equity with some holdings of
bonds, cash and derivatives).
• Exempt from income
capital gains tax
and •
•
Exempt from income
and capital gains tax
Luxembourg tax d’abonnement
(0.01 to 0.05 percent),
some exemptions
Investment
level tax
• Wide treaty access for
tax-transparent funds
non • Some treaty access for
non • Some treaty access for
non
Stamp Duty • n/a – exemptions now available • n/a • n/a
VAT ‘Special Investment
e.g. UCITS
Funds’ ‘Special Investment
e.g. UCITS
Funds’ ‘Special Investment
e.g. UCITS
Funds’
Source: KPMG

Supporting Trade
and Investment
If you are thinking of the UK as a place in which,
or from which, to do business, help is available
to make the process of setting-up easier.
UK Trade & Investment (UKTI)
is a UK national government
department that offers free
support and independent advice
to overseas companies looking to
invest or locate in the UK.
Within that, UKTI Financial
Services Organisation (UKTI FSO)
offers full support for asset
managers wishing to establish a
presence in the UK.
The UKTI FSO acts as a single
body for companies to engage
with, as they plan to grow in, and
from, the UK. While the UKTI
FSO covers the full spectrum
of financial and professional
services, the FSO focuses
particularly on areas with the
greatest potential for future
growth or opportunities in the UK,
including asset management,
financial technology, insurance,
back and middle office, Islamic
finance and RMB
internationalisation.
the FSO focuses
particularly on areas
with the greatest
potential for future
growth or opportunities
for the UK.

One Stop Shop
Concierge Service
A One Stop Shop Concierge Service gives you
all the help you need to set up in the UK.
Working with colleagues across
UKTI’s overseas network, the
UKTI Financial Services
Organisation offers a One Stop
Shop Concierge Service for fund
managers wishing to set up in
the UK, bringing together access
to all of the service providers
required to establish a presence
here in the UK, from accountants
and legal advisers to the
regulator and Government,
to provide a comprehensive
package of assistance.
The One Stop Shop Concierge
Service provides a number of
services to overseas companies.
These include:
• Help navigating the process
of setting up an investment
management company in the
UK, including help in obtaining
authorisation from the UK
regulatory authorities.
• Introductions to the
professional services
providers who are on hand
to assist in the application
process, as well as taking you
through the practical steps that
a company needs to go through
to establish a presence in the
UK, including registering a
company, corporate structure
and opening a bank account.
• Accessing market
opportunities: help
international companies
quantify and assess market
opportunities in the UK
and Europe.
• Access and introductions to
the right people: working with
every UK government
department to support
business to access a vast
network of industry experts
and local partners.
• Bespoke market research:
compile in-depth factual reports
tailored to your needs, including
market entry support, research
and development collaborations
and cost analysis.
• Helping select the best
market location: provide
practical help with site
selection through visits to
locations and premises with
regional experts on hand
to offer advice.
• Tax advice: UKTI can help
facilitate the provision of
information about the UK
tax system, incentives and
administrative processes.
• Support with applying for
visas and entry to the UK:
provide practical support and
advice on the UK immigration
system, how it works and the
different visa categories.
• Finding top quality staff:
guidance on staff recruitment
and locating the required
skills base.
• Ongoing government support:
continued support after your
business is established in the
UK, providing assistance on
expansion and representing
your interests in government.

Growing your business and leveraging
opportunities internationally
Once here, UKTI FSO can also help your business
grow internationally.
We provide expert trade advice
and practical support to UK
based companies wishing to grow
their business overseas. UKTI has
professional advisers both within
the UK and across more than 100
international markets. Through
a range of unique services,
including participation on
outward missions and providing
bespoke market intelligence,
we can help companies enter
overseas markets and get to
grips quickly with overseas
business practice.
We also offer sector and market
specific advice and support
through a range of on-going
government initiatives and
bespoke activities.

Email: enquiries@ukti-invest.com
Telephone (from outside the UK):
+44 (0)20 7333 5442
Telephone (from inside the UK):
0845 539 0419
Contact the team
Karthik Iyer
Asset Management Sector Lead –
UKTI Financial Services Organisation
T: +44 (0)20 7215 5158
M: +44 (0)7920 594 671
E: karthik.iyer@uktispecialist.com
Emma Wegoda
Project Manager – Asset Management –
T: +44 (0)20 7215 3925
M: +44 (0)7554 338 630
E: emma.wegoda@ukti-invest.com
Matt Lister
Account Coordinator –
T: +44 (0)20 7215 5152
M: +44 (0)7899 847 623
E: matt.lister@ukti.gsi.gov.uk

gov.uk/ukti
UKTI
UK Trade & Investment is the Government Department that helps
UK-based companies succeed in the global economy. We also help
overseas companies bring their high-quality investment to the UK’s
dynamic economy acknowledged as Europe’s best place from which
to succeed in global business.
Disclaimer
Whereas every effort has been made to ensure that the information in
this document is accurate, neither UK Trade & Investment nor its parent
Departments (the Department for Business, Innovation and Skills, and the
Foreign and Commonwealth Office) accept liability for any errors, omissions
or misleading statements, and no warranty is given or responsibility
accepted as to the standing of any individual, firm, company or other
organisation mentioned.
©CrownCopyright2015
Youmayre-usethisinformationfreeofchargeinanyformatormedium,
strictlyinaccordancewiththetermsoftheOpenGovernmentLicence.
Toviewthislicence,visit:
www.nationalarchives.gov.uk/doc/open-government-licence
ore-mail:psi@nationalarchives.gsi.gov.uk.
Wherewehaveidentifiedanythirdpartycopyrightinformationinthe
materialthatyouwishtouse,youwillneedtoobtainpermissionfrom
thecopyrightholder(s)concerned.
Anyenquiriesregardingthismaterialshouldbesenttousat
enquiries@ukti.gsi.gov.ukortelephone+44(0)2072155000.
Thisdocumentisalsoavailableonourwebsiteatgov.uk/ukti
Production
The paper in this document is made from 50 percent recycled waste pulp
with 50 percent pulp from well-managed forests. This is a combination of
Totally Chlorine Free and Elemental Chlorine Free. The inks are vegetable
oil-based and contain resins from plants/trees and the laminate on the
cover is sustainable, compostable and can be recycled.
Published January 2015
by UK Trade & Investment
URN UKTI/14/1234
Image credits
Frontcover:© VladimirZakharov/Getty,Inside
frontandinsidebackcover:© ShomosUddin/
Getty,p03,08,14(top),15,23,25(Birmingham
Cardiff,Liverpool,Manchester),26,30,33,
and34:© OliverSlay/CrownCopyright,p12:
© EvaYim,p13: okeyphotos/Getty,p14(bottom):
© CompassionateEyeFoundation/Getty,
p17:©MacieJNoskowski/Getty,p18: © Vladimir
Zakharov/Getty,p22: © Credit: PeterMukherjee/
Getty,p24: © iStock,p25(Leeds):© Chris
Thompson/Getty,p28: © AnthonyMayatt/
Getty,p29:©andrearoad/Getty,p34:© MacieJ
Noskowsk/Getty,p35:©MontyRakusen/Getty,
p36: ©JasonHawkes/Getty

UK Trade & Investment: Fund Management in the UK

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (7)

Similar to UK Trade & Investment: Fund Management in the UK

Similar to UK Trade & Investment: Fund Management in the UK (20)

More from Mitch Ackles

More from Mitch Ackles (20)

Recently uploaded

Recently uploaded (20)

UK Trade & Investment: Fund Management in the UK