Brexit "terrible" for London – but my asset management firm can only benefit

 
William Turvill
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Brexit Fears Continue To Hit Financial Markets
Christophe Evain says the City of London's fate lies in the hands of politicians now (Source: Getty)

Christophe Evain, the French chief executive of FTSE 250 alternative asset manager Intermediate Capital Group (ICG), does not hold back when asked for his view on Brexit.

“I think that the result is a terrible one,” he says, speaking to City A.M. from his firm’s offices in St Paul’s Churchyard.

“I think the impact on the City in the long-term cannot be positive,” he adds. “All you have to see is the process that has already started, whereby other European cities are now fighting to attract bits or parts of the financial services that have been established here.”

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It’s not just the prospects of the City of London he’s concerned about, though. For Evain, it’s personal. “We’ve all heard about verbal abuse to these people that happen not to be British, and we’ve seen more of that,” he says.

“Some of the rhetoric used by the politicians has been unfortunate. In a way they would negotiate with the EU and basically use the EU population in the UK as a bargaining chip in their discussions with the EU. I don’t particularly like the idea of being used as a bargaining chip. And I don’t particularly [like] the idea that they’re going to use the word deportation as a possible option.

“A lot of people have built their lives in this city – sent their kids to British schools, or French schools, but most of them then end up going to UK universities. And nobody expected that sort of outcome.”

He adds: “I’ve been here for 12 years. I’ve enjoyed what London has become over these past years. It may not be for everyone’s tastes, but I think it has become a highly competitive place, a highly successful place, attracting talent from all over the world.

“And I’m very disappointed that the country has taken a decision which in my view is going to hit all of the UK, but London in particular. That’s the reason I’m disappointed.”

Another explanation for Evain’s disappointment, of course, could be what it means for his company. Since 23 June, its share price has plummeted from 622p to 510p. But he dismisses this suggestion. In fact, he says, ICG can only benefit from Brexit – at the expense of banks.

“[The share price] has dropped since the vote – I believe mostly because shareholders, the market, takes a pretty indiscriminate view on financial services, assuming that everybody’s going to be hit the same,” Evain says. “The point that we keep making to our shareholders is that, first of all, the bulk of the capital that we manage is locked up into closed-end funds. We’re not going to see redemptions, we’re not going to see people going through a risk-off period and therefore taking their capital out of our funds. That’s not going to happen. And therefore there is absolutely no impact on the fees.”

He adds: “The sterling is one component of what we do – this is the currency in which we report. However, most of the underlying fund will be in US dollars are in euros. And then, from an investment point of view, what we are going to see – what we are already seeing – is banks withdrawing further from the lending to companies, investing into companies. Simply because of the uncertainty and because of the fact that they were already suffering from negative interest rates, you could quite see that it’s going to impact their ability to lend to the economy, and part of our activity is to be a non-bank lender.

“I can only see benefits in this for us… ultimately what has just happened is that central banks have lowered the interest rates further, which means that investors are going to go for higher-return assets. Banks are withdrawing from the market, which means there will be more opportunities. And therefore I think there will be opportunities for us.”

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Evain acknowledges that, depending on how the government’s Brexit negotiations with the EU pan out, ICG will have to consider its operations in London and Europe.

“We are reviewing what it all means to us,” he says. “But I think a big part of this is going to be how negotiations progress. We do not have at this point drastic plans to move people out of the country. It may well be that we have to establish a registered entity elsewhere and have a bit more substance there. But we’re not in the same position as the banks.”

ICG is not the only firm preparing to consider its options after the Brexit vote, with big banks, Vodafone and easyJet among those understood to be in similar positions.

How does Evain believe the City of London will look in a couple of years? “I think you’re going to have to ask the future Prime Minister for what she – because it’s likely to be a she now – has in her mind, and the plans she has in her mind to try and protect the City of London. If she does have such plans, indeed.”

He adds: “It may well be that government make the environment in London so attractive that people won’t be tempted to move. It may well be on the other hand that the government actually won’t see it as a big problem if financial services reduce in London. In which case what we’re going to see is a property crisis and we’re going to see people moving out of the country and financial services in the City being a lot less prevalent five years from now than they are today.”

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Evain first lived in London in 1994 when he joined ICG as employee number 14 – “it was a tiny little firm”. Evain left London for Paris, moved to Hong Kong and then back to London in 2004. He has been on ICG’s board since 2003 and was appointed chief executive in 2010.

More than 20 years on from when he first joined the company, ICG has 11 offices across the world, around 300 staff and more than €20bn in assets under management.

Under his leadership, Evain says the business has been transformed from a principal investment firm into an asset manager supported by an investment company.

Asked what the future holds for ICG, Evain says he believes it will continue “growing as an increasingly diversified alternative asset manager with a global reach”. He sees opportunities to expand in corporate investment, the debt capital market, real asset and private equity fund areas of the business.

Evain adds: “I can only see tailwinds in this industry and this recent result, the referendum, is not changing that at all.”

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