Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.

Tweet us @Fides_Search to let us know your thoughts.

This week:

1) Who runs the world…GIRLS!

With Theresa May becoming the UK’s second female Prime Minister and Liz Truss the first ever female Lord Chancellor, the political scene has shifted significantly from a gender perspective this week. Politics aside, gender equality was big on the agenda in the Fides office this week as we hosted our first roundtable discussion on the subject of building inclusive legal teams. For more information on the debate, or to be added to our mailing list to hear about similar events in our Path to Parity series please contact research@fidessearch.com

The issue of gender and the representation of women in the higher echelons of law also caused ripples across the Atlantic this week, as news emerged that Faiza Saeed was elected as presiding partner at Cravath, Swaine & Moore – the first female leader of any Wall Street firm.

The current co-head of M&A, Saeed was the consensus choice among the firm’s 89 partners and will assume her position in January whilst continuing to practice. With joint Pakistani-American heritage Saeed will also become one of only a handful of Asian-Americans ever to lead an Am Law 100 firm, a major diversity milestone in its own right.

With gender parity at entry level into law firms in the US and UK, the underrepresentation of women in partnership and positions of senior management continues. Whilst 34% of partners in large American law firms are women, they only make up 18% of equity partners and 8% of employees earning more than half-a-million dollars. In the UK, women still only account for 17% of full equity partners in top 10 firms and 16% in top 11-25 firms, figures that have remained consistent over the past few years. This suggests that the impending launch of gender pay gap reporting will reflect poorly on law firms when introduced next year.

Despite this, evidence suggests that firms are making concentrated efforts to improve the talent pipeline for women and increase the number of female role models within their firms. Last week CMS became the latest firm to pilot a work allocation system for associates in its corporate department, following schemes introduced by Ashurst and Hogan Lovells last year. The distribution of work through a dedicated resource manager helps to eliminate unconscious bias associated with receiving work directly from partners, and ensures that associates experience a wider variety of work as their career progresses.

In the US, data from the AML’s Women in Leadership Survey also found that despite low partnership numbers, 23% or one in four female partners are members of key governing committees, including key decision-making bodies such as compensation and partner promotion committees. With women only making up 18% of equity partners, this means that a female equity partner is significantly more likely to sit on a key governing committee than her male counterparts, both increasing the number of female lawyers in leadership positions and creating female role models for the future.

Whilst a major milestone has been reached with the election of Faiza Saeed as presiding partner at Cravath, the path to gender parity in law is a long and complicated one. Saeed’s election demonstrates that women can succeed at the highest levels in law and provides hope for the future that greater numbers of female lawyers progress now that firms are more actively engaged in the issue.

2) Deutsche Börse / LSE merger

 In February it was announced that the German stock exchange Deutsche Börse and London Stock Exchange (LSE) were in merger talks in a deal worth £27billion, creating the world’s biggest exchange operator by revenue and the second largest by market value. It will also be viewed as a much needed European powerhouse to rival exchanges in Asia and the U.S. This merger is indicative of the current exchange sector which in recent years has seen a decline in their number, as firms have merged to ensure they can compete globally, moving away from the traditional “specialist” model to a broader inclusive platform.

The potential merger has been met with various roadblocks, particularly since the UK voted to leave the EU last month. Germany and France have questioned the arrangement which would result in the business being located in London and effectively outside of the EU. This has raised concerns that a euro clearing house should be based in Frankfurt and within the EU, rather than in the UK, despite Britain’s victory in the courts last year to protect its right to clear euro trades.

Shareholders remain divided, and whilst LSE shareholders are still approving of the deal, some German investors have become skeptical, calling for a re-evaluation of the plans. Deutsche Börse decided this week that it would lower the threshold for the number of shareholders needed to approve the deal from 75 per cent to 60 per cent. 53 per cent of investors have tendered their shares so far.

Although there are concerns with the exchange being held in a non-EU country, coupled with the new political climate, many are offering a positive spin on the merger. The new exchange could provide a much-needed bridge between Britain and the EU, highlighting the importance of keeping a solid relationship, mutually beneficial to both economies. As Andreas Dombert who sits on the Bundesbanks executive board commented “The parties’ concerned need to find a governance structure which balances all reasonable interests – even at the expense of synergies”

Should the merger still go ahead, where Deutsche Börse/LSE are headquartered should be a tell-tale sign of things to come. There are a number of broader financial services firms considering a shift from London to main land Europe, mainly due to passporting issues should the UK not secure favourable terms and access to the single market. However, as with most issues concerning Brexit, we can only speculate until we have a clearer picture of the deal to be struck with the UK and the rest of the EU.

MOVERS & SHAKERS OF THE WEEK

Appointments

Visa Europe appoints new deputy GC
Visa Europe have appointed Prini Pithouse as deputy general counsel after starting in the company in May 2015

Barclays appoints GC for its corporate and international arm
Mark Shelton has moved from his role of legal head for the investment banking and Americas to GC of Barclays Corporate & International (BC&I)

Freshfields Bruckhaus Deringer appoints new regional managing partners for its European offices
Berlin competition partner Helmut Bergmann has taken up the role of regional managing partner for Germany, Austria, and central and Eastern Europe, whilst Paris corporate partner Alan Mason takes on the newly created role of managing partner for the rest of continental Europe

Moves

Ashurst exits continue as City restructuring partner joins Reed Smith
Ashurst has lost another partner in London with restructuring and insolvency expert Diane Roberts joining Reed Smith.

Sidley Austin Continues London Expansion with Leveraged Finance Partner
James Crooks has joined Sidley Austin LLP as a partner and member of its Global Finance practice in London.

White & Case expands Global Banking Practice with new partner in London
Jeffrey Rubinoff joins the Global Banking Practice of White & Case

Former KWM European finance chief to join Cadwalader in London
King & Wood Mallesons exits continue with former finance head Jeremy Cross joining Cadwalader, Wickersham & Taft LLP

KWM litigation partner follows ex-head to Covington & Burling
King & Wood Mallesons litigation partner Greg Lascelles is to follow his former practice head to US firm Covington & Burling.

Latham & Watkins makes second Ashurst hire this month
Leading Restructuring and Insolvency partner Simon Baskerville joins Latham’s London office

Senior Prosecutor from the UK’s Serious Fraud Office to Join Latham’s in London
Stuart Alford QC set to join Latham & Watkins as a partner in the Litigation and Tax department

Latham’s builds Real Estate Finance Practice
Jeremy Trinder and Quentin Gwyer have joined the firm’s London office as a partners in the Finance Department.

DWF enhances commercial litigation offering in London with team hire from PwC
DWF has appointed partner Jonathan Isaacs, senior associate Joshua Fineman and solicitor Alex Green to build on the firm’s commercial litigation offering in London.

K&L Gates welcomes London finance partner from Mayer Brown
Mayank Gupta has joined the firm as a partner in the firm’s global finance practice.

Osborne Clarke Netherlands bolsters team with four new hires
OC makes four additional hires in the Netherlands, including Johannes de Jong joins as Head of the Amsterdam Financial Regulatory practice

Hogan Lovells hires corporate tax partner
Elliot Weston joins Hogan Lovells from Gowling WLG

Office Openings and Closings 

K&L Gates opens Munich office with hire of KWM team

Shoosmiths to launch Leeds office with Gordons partners

Clyde & Co opens first German office with team hire from Noerr

Dentons opens second Italian office in Rome

Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.

Tweet us @Fides_Search to let us know your thoughts.

This week:

1. Andrew Bailey’s first week on the job

On Monday, Former Deputy Governor of Prudential Regulation Andrew Bailey commenced his first week as the new Chief Executive of the Financial Conduct Authority (FCA). It seems he has come into the organisation at a tumultuous time, as the outcome of the EU referendum will result in a heavy work stream for the regulator, alongside the wave of changes that are being made to numerous regulations.

Bailey has already had his first dealings with the aftermath of Brexit as the UK’s biggest commercial property fund decided to close its doors following the vote. Standard Life Investments, closely followed by Aviva and M&G, chose to suspend trading on their UK property fund on Tuesday, the first time Standard Life have stopped investors from taking money out of the real estate fund since the financial crisis in 2008. Bailey signed off on the suspension, but claimed that monitoring the behaviour of these funds is necessary while also highlighting his reservations in the press earlier this week, commenting that the design of these funds needs to be reviewed due to the illiquid nature of the assets.

This is just another reason for the asset management industry to be placed under further scrutiny. The new chief exec has arranged to meet with the country’s largest asset managers to discuss the effects of Brexit on the industry, whilst the FCA’s upcoming asset management review could likely bring about fundamental changes to the £6.6 trillion industry.

As FCA head he will also oversee changes to a number of important directives that will be coming into play over the coming year. Solvency II and MAR are just a couple of examples of newly implemented regulations, not to mention the delayed implementation MiFID II. It’s too early to tell what effect Brexit will have on the UK financial services regulation, but it’s clear that Bailey’s main priority will be ensuring market stability and maintaining European regulations may be the best approach to do so.

The market will be watching how Andrew Bailey approaches this new tenure and drives the direction of the FCA as he considers the best approach to securing the stability of the UK financial services sector and the effectiveness of current and incoming regulation. If he manages to navigate this well, not only could he transform the financial services landscape, but there is also talks that he will have put himself in good stead to return to the Bank of England as the next Governor.

2. Financials season

It’s that time of the year again, and law firm financial postings are flooding in. On the whole, the results have been encouraging, albeit showing fairly moderate gains, with most firms posting revenue rises in single digits.

Out of the magic circle firms, Freshfields Bruckhaus Deringer announced the greatest uptick in revenue, posting a 7 per cent rise to £1.327bn, in comparison with Linklaters, Clifford Chance and Allen & Overy reporting increases of 3.5 per cent, 3 per cent and 2.3 per cent respectively. Freshfields is one of the few UK based law firms to have experienced significant growth in the US, which is one the key reasons for their promising 2015/16 figures. It seems their offices across the pond remain a priority in the firm’s growth strategy, as they continue concentrating on corporate enlargements in the jurisdiction, further validated by the appointment of NY based partner Valerie Ford-Jacob to co-lead the financial institutions sector group.

Most firms have experienced modest uplifts in both revenue as well as profit per equity partner (PEP), but the two to note that have posted some of the best results for 2015/16 so far are Clyde & Co and Herbert Smith Freehills (HSF).

Clyde & Co has seen the largest rise in turnover amongst law firm results so far with an impressive 13 per cent increase in turnover to £477.3m. This exceeds their previous year’s similarly remarkable 9 per cent revenue boost, whilst this year’s PEP climbed to £665,000 from £600,000. The firm have been aggressive with their expansion plans, merging with six office Scottish firm Simpson & Marwick last year as well as taking on a 30 lawyer team from Sydney firm Lee & Lyons. A further boost in headcount is also in the pipeline, with a new Miami office opening in July, which will see a 40 litigation lawyers joining from the acquisition of five partner strong litigation firm Thornton Davis Fein in May.

Meanwhile, HSF’s joint CEO Sonia Leydecker said their financial results marked “the third consecutive year of significant progress for the firm.” The firm turned over £870m, a rise of 6.7 per cent from 2014/15. PEP was also up by 5 per cent to £840,000, although this showed a slight slowdown compared to an 8 per cent rise in PEP in 2014/15. Their achievement has largely been attributed to their European offering. Paris and Madrid have proved noteworthy offices for the firm, and Germany has been highlighted as an “ongoing success story”, with their fourth German office opening in Düsseldorf in November 2015.

This year’s results has unfortunately highlighted Ashurst’s continuing struggles, as it marks the second consecutive year of decline for the firm. The firm’s revenue dropped 10 per cent to £505m, which follows last year’s 4 per cent decrease. Ashurst’s PEP took a hard hit in 2015/16 as it fell by 19 per cent from £747,000 to £603,000. Since the merger with Blake Dawson in 2013, Ashurst’s figures have been anything but promising. With a lot of lateral partner movement flowing in and out of the firm, along with a shake-up of its executive management team, the firm has experienced a turbulent year, and after two years of falling revenues, the next twelve months will prove critical for the firm.

On the whole, it’s been a stable year for UK law firms, although growth may have slowed for many compared to last year. It will also be interesting to see how firms react to the challenges and opportunities that will be brought about by the current political climate and, in turn, volatile financial markets.

Movers & Shakers of the Week

Appointments

Linklaters appoints global head of corporate
Following the end of Robert Elliot’s five-year term in October, M&A partner Aedamar Comiskey will take over as Linklater’s global head of corporate

Moves

OneSavings Bank hire new GC
Jason Elphick has joined OneSavings Bank as their group general counsel after departing Santander where he served as their head of banking legal.

Simmons makes further hire in Amsterdam
Simmons & Simmons appoints Erwin Bos as a partner in their financial markets team in Amsterdam. He was previously a counsel at Allen & Overy.

Simmons adds to International Projects team
Simon Moore joins Simmons & Simmons as a partner in their projects team. he joins from Mudabala Development Company, where he was the general counsel for projects globally.

Cadwalader makes rare City hire
King & Wood Mallesons loses former European finance chief Jeremy Cross. He will join Cadwalader, Wickersham & Taft in their London office, and marks the first lateral hire for the US firm since March 2015

Latham hires SEC chief
Former chief of the U.S. Securities and Exchange Commission’s office of international corporate finance Paul Dudek will be joining Latham & Watkins as counsel in the firm’s corporate department

Squire Patton Boggs boosts Madrid capability
Manuel Mingot has been hired by Squire Patton Boggs as a financial services partner. He was previously head of the Madrid finance practice at Broseta Abogados, and co-head of its UK desk in London

Shoosmiths strengthens City corporate practice
Adam Chamberlain has left RPC as a senior associate to become a corporate partner in Shoosmiths’ London office

Ashurst takes on funds finance partner from KWM
King & Wood Mallesons lose finance partner Robert Andrews to Ashurst in London

Following our insight last week on the immediate aftermath of Brexit and the reaction from our clients on the continent, this week we further develop this line of thinking to assess what the reality of Brexit might mean for law firms operating throughout Europe.

As has been widely reported in the legal press this week, one initial change we can expect to see in London is a slowing of the pace of growth and investment from US firms as they assess the possibility of growth in mainland Europe. This is despite a number of US firms committing to mid-term growth strategies in London.

Although US firms are often quick to seize opportunities in new markets, according to those we have been speaking to this week, development of US practices on the continent might not be that simple.

With the immediate impact of Brexit causing the dollar to gain significant ground on both sterling and the Euro, we could see a significant opportunity for US firms to pick up European talent and build their businesses accordingly, as those who are remunerated in sterling open their mind to the perceived safer haven of US firms who compensate in dollars. This is particularly the case for partners at UK firms who have seen both their remuneration and capital contributions diminish overnight.

However, this view fails to take into account a key financial factor. If the Euro weakens (as it has) against the Dollar, that the revenues and profits generated by US firms in Europe will decrease. As we have seen, US firms have been more focused in recent times on London due to the greater profit margin on offer in the City, which will not change with Brexit. Furthermore, a partner being paid in Dollars and billing clients in Euros offers US firms more problems when it comes to profitability. On the other hand, whilst law firms should not look to expand and contract based on exchange rates, one positive for UK firms to take from Brexit is their continental partners just got that little more profitable with the sterling’s slide against the Euro.

Whilst there will always be opportunities for US firms to make strategic investments, we feel the likelihood of substantial growth on the continent unlikely, at least in the short term, following Britain’s decision to exit the EU. For UK firms, businesses able to think clearly and implement an international strategy enabling them to take advantage of European opportunities will best be able to navigate this uncertainty.

So whilst there are clearly still no answers at this early stage following last week’s news, the debates have begun and we here at Fides are keen to engage fully to advise our clients and contacts accordingly. Amongst the turmoil of Brexit there will be gains to be made.

Written by Tom Spence, Director at Fides Search

Consultants Barrie Lee and Max Alfano discuss how Brexit can impact the in-house legal and compliance market

The phrase, “a week is a long time in politics” coined by former British Prime Minister Harold Wilson has never seemed as relevant as it does today. The UK voted to leave the European Union, David Cameron stepped down as Prime Minister and the England football team also no longer felt the need to be in the European Championship, although most would have predicted this early exit. A Brexit, on the other hand, we did not.

So where do we go from here and what have been the initial reactions from the market? Are we at the beginning of a new dawn, a prosperous era for our country where we forge our own new path, or is this the beginning of the end? A long, turgid drawn out break-up full of acrimony and hate? The level of uncertainty created is palpable, as banks scramble to speak with their respected law firm contacts and consider potential contingency plans that have been outlined over the last few months, assessing their viability. Those in our regulatory lawyer network in particular have been under significant pressure in discussing and advising on the issues that this has created.

Across our compliance network, it has been noted that Brexit has added an additional variable to anyone considering their next opportunity. Career development, salary, scope and breadth of role are all of high importance throughout the due diligence process of your next employer, but now a bank’s strategy to relocate to avoid passporting issues needs to be considered. We’ve heard rumblings of Frankfurt or Dublin, which isn’t going to be viable for everyone, and institutions still feel the pressure of the FCA to deliver on the current pre-Brexit hiring strategies as a move of any kind is still a few years in the making. There has been much speculation in the press about banks’ contingency plans, relocating outside of the UK to a European hub, with HSBC moving 1,000 heads to Paris as one example. Clifford Chance comment that this is looking at the worst case scenario, and perhaps somewhat conveniently, it takes two years for a bank to plan and implement a change in operations whether it is nearshoring or offshoring. To put a finger on a single preferred location is a difficult question. Simmons & Simmons noted that there is not one European regulator which could handle the sudden influx of new registrations, moving away from a central European hub for banks.

We have previously discussed in an earlier blog, which considered the implications of Brexit, how our time zone, language, sophisticated legal system and high calibre workforce has allowed our country to flourish and be a dominant force in global banking. Last Friday’s result has not changed this and it should be for those same reasons that our economy, whilst may stagnate in the short term as expected, has the tools to capitalise on this new world and flourish. This is to be supported by the role of experienced, highly skilled compliance officers, who now more than ever have the ability to provide the bank with assurance and calmness to provide the most pertinent and recent advice.

Taking a view from an asset management and funds perspective, there are quite a few points which we can speculate on; however, much is still to be decided in light of the deal which will be struck between the UK and the EU. Hedge funds however are largely unconcerned with the move as their position will remain under the guideline of AIFMD, due to their status remaining as AIFs, even in their new standing as a third party to the rest of Europe. Hedge funds, in typical fashion, went around lacing their palms in the days running up to the vote. According to Marshall Wallace, Odey & TT international shorting UK stocks, the consensus from their side of the fence has been fairly consistent, with many hedge funds being strong advocates of the leave camp through the build-up. One commentator from a leading trade association commented that “the nature of their business is largely London, NY & Hong Kong, the rest doesn’t always matter”.  Hedge funds will therefore look to capitalise on any situation and work with the position they gain.

With the major listed asset managers conversely, their struggle has already started to hit home. At what was already a difficult time for the asset management industry, with profits being squeezed and significant outflows, after the vote there were a number of redemptions whilst also taking a massive hit in share price. Looking ahead, another challenge we envision is whether the EU will recognise the UK in terms of equivalence. If not, passporting along with marketing, could potentially be a logistical problem and, in turn, the UK UCITS funds could be viewed as AIF’s to their EU investors. Luxembourg or Dublin would act as possible homes for many of these organisations, with M&G already looking at Dublin as their new centre. A lot of this will also come down to the FCA and how far they’re willing to go in keeping to EU laws. If they differ or become more lenient on certain laws after article 50 then equivalence could present a problem. It seems likely for a BAU situation and EU Regulation to still apply to the UK for the foreseeable future.

Much was made in the build up to the referendum, with plenty of “fearmongering” from both sides. We now must recognise that the only way to really make a positive outcome is to collaborate and pool our resources to continue to make sure the UK remains a financial & professional services global powerhouse. There will undoubtedly be regulatory challenges and we have already experienced a slower market from a transactional perspective. However, there will be opportunities to capitalise on from a legal and compliance outlook, once the relationship between the UK, the EU and beyond becomes clearer.

Hello and welcome to the Brexit special of the Fides Weekly Update.

Results of the EU referendum have been released and as we face the decision that Britain have chosen to leave the European Union, we provide you with a short overview of the reactions in both the UK and European markets.

Tweet us @Fides_Search for your thoughts on the result #EURefResults

This week:

Brexit: Continental Shockwaves 

Whilst an equally divided Britain wakes up to the news that the country will be leaving the European Union, the shock and in some quarters disbelief across mainland Europe might be more palpable. During recent weeks the team at Fides have been meeting and speaking with numerous leading figures across the continent to gather their views in the lead up to yesterday’s referendum. As those views in light of this morning’s news are outdated, we will provide a more extensive update next week once the dust settles across the EU, although the expectation across Europe from the legal and financial sectors prior to the result are important when assessing how these markets will evolve and move forwards in light of Brexit.

Generally speaking, most in mainland Europe held the view that there was a very limited chance for a Brexit, with some respondents almost dismissing the idea entirely contending that when the public went to the polls, Europe would prevail and the threat offered by the Leave campaign would be quashed. What we have instead is the complete opposite. Whilst here in the UK there was an awareness of a potential Brexit and a noticeable surge in momentum building from the Leave campaign, the European view seemed one of scepticism that this could actually happen. This scepticism has led to disbelief and dismay is now very much the reality. Whilst the UK comes to terms with this definitive change in course, the question that many within mainland Europe will now have to tackle is where this leaves their nations domestically from a political context, as the continued rise in nationalism is likely to surge upon this result.

Whilst the economy comes to terms with this result, we must recognise that the shock being felt across mainland Europe might potentially be greater than that seen here in the UK. Those in mainland Europe will now be coming to terms with the fact that there might be greater changes ahead for the EU, as the public voices of other member states might begin to be heard more loudly and clearly seemingly than those here in the UK.

We here at Fides remain committed to our work for clients across Europe and will bring full reaction to this result from our network next Friday.

Brexit: Market Reaction

Today Britain voted to leave the European Union. Law makers have been divided on the subject in spite of every major party aside from UKIP campaigning to Remain. It is now clear that London voted wholly in favour of the UK remaining in the EU, along with Scotland and Northern Ireland. Questions will now be asked and we will enter what must be considered a period of significant uncertainty. The reaction of the financial markets has been negative as expected, further exacerbated by the significant late betting on a remain vote last night worsening the fall of the FTSE and the Sterling.

Internationally, our close friends, colleagues and business partners will also be scratching their heads, no doubt asking themselves what next? The reality is that Brexit will create an unprecedented amount of work for law firms, but whether this is additive to the wider industry and how it effects the future of the sector is yet to be seen. Markets across the world are reeling from the ‘out’ vote and it is for our politicians and business leaders to provide calm heads and clarity to enable the financial markets to settle more swiftly from this shock. The Prime Ministers decision not to immediately invoke Article 50 following the result, along with statement from Bank of England governor Mark Carney, have offered the markets some comfort in the short term but the long term uncertainties will continue to create a fragile state within the City.

Importantly, whilst financial institutions and corporates will be looking for answers, we have seen law firms rally and react at pace to the questions of what next by utilising webinars to host briefings and setting up Brexit hotlines for clients. We anticipate that this trend will continue as there is a significant responsibility burdened on the legal sector to help clients understand and approach this period of change. Law firms along with many businesses will now have to consider their strategy here in the UK and across the continent in this newest of new worlds.

There is no doubt that challenges lie ahead for the legal sector, but given the calibre of lawyers based in London and their colleagues across Europe, we are sure that this will represent a truly interesting chapter in peoples career. The same has to be said for our friends and colleagues working in-house within legal and compliance. Those we canvased last night were somewhat more positive than those that we have spoken to this morning, but there is a sense of rallying to work through the shock to enable the UK and Europe to get through this as smoothly as possible.

So whilst this is a shock and goes against what many in the City might have wish for, it is those within the legal and compliance sectors that must react with a positive mindset to embrace this challenge, and we believe the industry and our clients are well placed to do so.

Movers & Shakers of the week 

Moves

McDermotts makes double partner hire in London
McDermott Will & Emery have added Simon Goldring and Michael Holter to their partnership in London, sitting in their private client practice and transactional practice, respectively.

Dentons strengthen London corporate practice 
Partner Jonathan Cantor is to join Dentons’ corporate practice in London from Nabarro

EY Legal boosts capability in the Americas
EY launches a legal services practice in Argentina with the hire Jorge Garnier from energy company Genneia as well as launching a practice in Chile with the former GC of retailer Falabella Paola Bruzzone. EY has also hired corporate partner Tony Kramreither from Norton Rose Fulbright to lead the legal team in Canada.

Freshfields senior corporate lawyer moves in-house 
Mark Rawlinson, former head of corporate at Freshfields Bruckhaus Deringer, has moved to Morgan Stanley where he will lead their UK investment banking arm

Freshfields lose executive partner in NY
Executive partner Michael Lacovara joins Latham & Watkins in their litigation and trial department in New York

Reed Smith makes US securities appointment
Reed Smith has hired US securities partner Daniel Winterfeldt from CMS Cameron McKenna, where he previously led their international capital markets group

Office Openings & Closings

Mayer Brown launches first Middle East office 
Mayer Brown has opened a new office in Dubai, to be headed up by Middle East chair Charles Hallab and regional corporate head Tom Thraya who both joined the firm from Baker & McKenzie last year.

Ashurst to close in Sweden
Ashurst is closing it’s Stockholm office, with all lawyers moving to local firm Hamilton

Mergers & Alliances

Ashurst partners with Axiom
Ashurst have announced a partnership with Axiom to support banks in meeting new regulations coming into force in 2017

Fieldfisher merges in Italy 
Fieldfisher has merged with Italian firm Studio Associato Servizi Professionali Integrati (SASPI)

Partner Promotions

King & Wood Mallesons promotes 12 lawyers in Australia

Welcome back to the Fides Weekly Update. Here we provide you with the main trends, moves and developments in legal and compliance. Scroll down to check out the Movers & Shakers of the Week.

Tweet us at @Fides_Search – we would love to hear from you!

This week:

New tech on the market for OTC derivatives regulation

This week we saw an alliance formed between a magic circle firm and one of the Big Four that could signal a significant shift in the legal market.

Allen & Overy has partnered with Deloitte in developing a tech system that helps banks handle new regulatory requirements in the over-the-counter (OTC) derivatives market.

MarginMatrix is their newly launched digital derivatives compliance system, which codifies the laws in various jurisdictions and automates the drafting of tailored documents for OTC derivatives products, subject to rules under the European Market Infrastructure Regulation (EMIR).

The product also accommodates for the new margin requirements within EMIR coming into force this September. The new rules demand that all counterparties to derivatives contracts, which are not cleared through an authorised clearing system, must provide additional margin for their net exposures. Studies have estimated that banks will need to reserve approximately $10 billion to cover these initial margins. A&O claims that their new system will lead to significant cost-savings for their clients through the auto-drafting of complex documentation as well as minimise the risk of a non-compliant outcome.

The launch of this product was a ground-breaking move in the legal market, as it saw A&O and Deloitte join forces, combining A&O’s well-established derivatives practice with Deloitte’s impressive technical expertise and managed services. It highlights the impact alternative business structures are having on the legal market as they not only inject a new wave of competition in the sector, but also make strategic alliances to further solidify their stance in the sector.

MarginMatrix is just the latest in a string of new technology solutions tools available to law firm clients. Pinsent Masons’ Cerico, Simmons & Simmons’ navigator and A&O’s Rulefinder are some of the other tools banks can use to assist in maintaining regulatory compliance.

The Deloitte A&O tie-up is a further development that points towards the determination of professional services firms in becoming recognised legal services providers. It also adds to the raft of legal tech entering the UK legal market. With the increasing focus on effective client solutions, technology and innovation has become more fundamental in shaping law firms strategies, and we expect to see further developments both through increased outputs from law firm innovation labs and market collaboration.

Movers & Shakers of the week

Appointments

Sullivan & Cromwell elects new London managing partner
Corporate partner Richard Pollack has been named managing partner for the London office of Sullivan & Cromwell, taking over from Richard Morrissey in July

Moves

Simmons boost internal capital markets offering 
Simmons & Simmons have appointed former Allen & Overy counsel Jeroen Bos to their international capital markets practice in Amsterdam as a partner

Jupiter Asset Management gains new GC
Former Man Group general counsel Jasveer Singh takes on new position as GC for Jupiter Asset Management

W&C appoint Asia corporate head
Linklaters former Asia head of private equity Chris Kelly has joined White & Case, where he will sit in their global M&A practice and lead their corporate practice in Asia

Debevoise associate becomes legal chief at investment manager 
Chris Wright has left Debevoise & Plimpton to join Leadenhall Capital Partners as their head of legal

Skadden adds to white collar crime team in London
Partner Elizabeth Robertson leaves K&L Gates to join Skadden, Arps, Slate, Meagher & Flom in their European Government Enforcement and White Collar Crime practice

Quinn Emanuel hires HSF partner to launch UK construction disputes offering 
Partner James Bremen leaves Herbert Smith Freehills to set up Quinn Emanuel Urquhart & Sullivan’s UK construction disputes practice

Paul Hastings hires A&O finance counsel
James Taylor has joined Paul Hastings as a partner in their City finance practice, moving from Allen & Overy where he was counsel in London and Frankfurt

Mayer Brown further expand private equity offering in London 
James West departs Reed Smith to become a partner in Mayer Brown’s corporate & securities practice in London

Mergers & Alliances

Bond Dickinson makes transatlantic alliance
Bond Dickinson has carried out an exclusive strategic alliance with US firm Womble Carlyle Sandridge & Rice

Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.

Tweet us @Fides_Search to let us know your thoughts.

This week:

1) SFO TO CONSIDER REVISED FUNDING MODEL 

Legal Business provided further insight this week on the Serious Fraud Office’s (SFO) investigation into the forex scandal. After having submitted a Freedom of Information request, the legal press site revealed the SFO totalled £2.1m spend whilst investigating the market rigging.

The FX probe was dropped in March this year as the fraud agency claimed “insufficient evidence” as to why they were unable to demonstrate criminal activity, leading to zero charges being made against banks or individuals.

It seems the SFO’s tactic of employing a blockbuster funding model, whereby supplementary funding for certain investigations is granted by the treasury, has been called into question. A report from HM Crown Prosecution Service Inspectorate has argued that relocating resources away from such high-profile cases could be “more effective and provide better value for money”. Although this funding has allowed the SFO to take on cases that would normally be too big to pursue, the report insists that more needs to be done to increase transparency and better define the SFO’s approach to their spending. During the forex investigation, the SFO requested an extra £21m in funding to help it keep pursuing complex cases, which equates to 60% of their total budget for major cases.

The failure to make convictions in this case has led to many losing confidence in the SFO’s appetite for large-scale investigations. More recently, the SFO have been working on plans to charge four Deutsche Bank employees and one SocGen trader in relation to the alleged manipulation of Euribor. Perhaps the outcome of this investigation will be the deciding factor in proving whether or not the organisation is in fact ‘fit for purpose’.

Supplying sufficient budget to equip the SFO with enough resource to tackle large cases such as market rigging will always be a disputable topic. The improvements made to the organisational culture and risk assessment at the SFO have been promising, but moving away from the blockbuster funding model may prove challenging as financial flexibility is necessary due to the lengthy and costly nature of their investigations.

2) US ASSOCIATE PAY 

Following our analysis last week of associate salary increases in the Magic Circle, the war for top legal talent has intensified across the Atlantic following Monday’s announcement that Cravath, Swaine & Moore are raising base salaries for associates in New York and London to $180,000 (£123,600) for first-year lawyers.

In the first salary hike for junior lawyers since January 2007, before the financial crisis, the raise represents a $20,000 (£14,000) increase for first-year associates, which rises to $315,000 (£216,000) for eighth-year associates. This is up $35,000 (£25,000) on current levels at the firm, and is exclusive of any bonuses.

Associate Salary Scale – Cravath, Swaine & Moore
1st year – $180,000 ($160,000 + $20,000)
2nd year – $190,000 ($170,000 + $20,000)
3rd year – $210,000 ($185,000 +$25,000)
4th year – $235,000 ($210,000 +$25,000)
5th year – $260,000 ($230,000 + $30,000)
6th year – $280,000 ($250,000 + $30,000)
7th year – $300,000 ($265,000 + $35,000)
8th year – $315,000 ($280,000 + $35,000)

Response from the market has been sharp, with other predominant US law firms quick to confirm that they will match Cravath’s pay hike, with lawyers in London also set to benefit from the increase.

Milbank, Tweed, Hadley & McCloy, Paul Weiss Rifkind Wharton & Garrison, Weil Gotshal & Manges and Cahill Gordon & Reindel were among the first to agree to match Cravath’s pay levels, with Paul Weiss and Cahill both extending the rises to their London offices.

Wednesday saw the announcement that associates at Cooley, Debevoise & Plimpton, Simpson Thacher & Bartlett, and Skadden Arps Slate Meagher & Flom, will also receive pay increases on the scale adopted by Cravath.

Kirkland & Ellis have also agreed to match Cravath’s new pay scale in all of its offices up to those that qualified in 2010, who will receive $280,000.

Meanwhile, Latham & Watkins have also raised base pay for associates in a number of its international offices – including London.

According to The American Lawyer, Sullivan & Cromwell, Quinn Emanuel Urquhart Oliver & Hedges and Vinson & Elkins have all also upped their associate pay, although it is not yet clear whether these pay increases at these firms will apply to their offices outside of the US.

Cravath’s move to increase associate base salary in New York has also prompted UK firms in the region to review their associate compensation. Yesterday, Freshfields announced that first-year and second year associates in its New York and Washington offices will receive $180,000 a year, matching the increase by Cravath, whilst those who joined in 2007 or later will receive $325,000.

Clifford Chance has also announced this morning that US associates will also now receive $180,000, rising to $315,000 (£218,000) for those who qualified in 2008.

It is not surprising that leading law firms in New York and London have rushed to adopt Cravath’s new pay scale, which signals increased competition for a shrinking pool of top law graduates.

According to a report earlier this year in the American Bar Association, law schools graduated 39,984 students in 2015, down nine percent from the previous year. Beyond this, much of the drop-off has been among students with high GPAs and LSAT scores so firms have to be more aggressive to attract the best talent that is available.

For those in the AM 100 where it will not be feasible to adopt Cravath’s associate pay scale, it will be interesting to see how firms choose to implement the $180,000 starting salary across different ranks or office locations – as already witnessed at Kirkland and Latham’s – in efforts to remain competitive.

Cravath’s short partnership track of 8PQE also brings into question whether other law firms will do things differently on base compensation for their very senior associates and counsel. For the firms that only selectively introduce this model, salary compression and smaller pay increases for very senior associates is likely to be rife, erode associate morale and make it harder to retain lawyers at this level who are increasingly leaving for smaller firms or government and in-house opportunities.

In a broader sense, the raise in associate pay to $180,000 undercuts market trends to reduce the pricing of legal services and raises the question of how Cravath and others will meet be able to meet the needs of in-house counsel with limited budgets whilst their clients can obtain equal or better legal services at a fraction of the cost.

It also raises the question if such an increase in associate pay is needed to ensure the long-term growth strategy of UK-based international firms in the US.

MOVERS & SHAKERS OF THE WEEK

APPOINTMENTS

ISDA appoints new GC
David Geen has stepped down as general counsel for the International Swaps and Derivatives Association (ISDA), and is replaced by acting GC Katherine Tew Darras

Baker & McKenzie appoints new Chairman of the Firm
London managing partner Paul Rawlinson has been announced as the firm’s next global chair and is due to take over the role in October this year

WFW shifts chair to NY
Watson Farley & Williams moves chair Frank Dunne from its London to New York office and hires Mischon de Reya’s New York litigation head Joshua Sohn in an attempt to boost capability in New York

MOVES

EY expands competition team 
Addleshaw Goddard’s competition head Phil McDonnell has joined EY as an executive director and head of competition law for the UK and Ireland

Eversheds adds to London financial services practice
Clifford Chance corporate insurance partner Hugo Laing has moved to Eversheds’ London office in their financial services group

Dentons launches Milan competition offering
Dentons has hired Michele Carpagnano from Gianni, Origoni, Grippo, Cappelli & Partners to launch a competition and antitrust practice in the Milan office

Osborne Clarke hires real estate duo 
Real estate partners Jo Footitt and Louise Cartwright bot exit Irwin Mitchell to become partners at Osborne Clarke

Lathams adds Dechert finance expert to partnership
Jeremy Trinder has joined Latham & Watkins’ City finance practice from Dechert

White & Case makes finance push with Freshfields hire
Real estate finance partner Jeffrey Rubinoff has left Freshfields Bruckhaus Deringer to join White & Case

PwC Legal strengthen Australian offering
Four new partners have been added to PwC Legal’s partnership in Australia. Partners include Baker & McKenzie’s Ashley Poke and Ashurst’s Tiffany Barton into the corporate practice; Gilbert + Tolbin’s Cameron Whitfield as the head of PwC’s Australian digital and technology law practice, and Corrs Chambers Westgarth private equity partner James Delesclefs.

PARTNER PROMOTIONS

PwC Legal promotes five to director

Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.

Tweet us @Fides_Search to let us know your thoughts.

This week:

1. War for Talent: NQ Salaries on the rise

The war for talent further intensified this week as Clifford Chance became the fourth Magic Circle firm to unveil associate salaries for 2016-17.

The firm increased maximum pay by £1,000 for newly qualified (NQ) associates, hiking base salary to £85,000 plus a fixed bonus if individual development goals are met. This matches the NQ base salary at Freshfields, and offers more than the average pay and bonus for NQ lawyers at Linklaters.

As well as a salary uptick for associates with one year’s post-qualification experience (PQE) – from £90,600 last year to £95,000 – the firm also introduced changes to the base salary and variable bonus for 2 and 3 PQE solicitors depending on their contribution to the firm. Mirroring changes implemented in senior associate pay at Slaughter and May in 2013, those making a ‘good contribution’ can expect to earn a combined base salary and bonus of £100,000 at 2PQE and £111,000 at 3PQE, whilst those making an ‘excellent contribution’ are set to receive an average pay rate of £119,000 and £130,000.

Table: Magic Circle Associate Pay, 2016-17

Despite this, Freshfields still offer the highest base salary for NQ associates as it announced a 26% uplift on NQ salaries this year from £67,500 to £85,000. Newly qualified and 1PQE associates sitting in the firm’s career milestone foundation (CMF) band can expect to receive a base salary of between £85,000 and £97,500, but will not be eligible for a bonus. Lawyers at 2 and 3 PQE, who also saw their salaries rise substantially to between £105,000 and £115,000 up from £87,500 to £100,000, are eligible to receive a bonus of up to 20%.This rise in associate salaries follows a firm-wide freeze in salary bandings last year.

This was accompanied by a more modest increase announced in base salary at Slaughter and May, with NQs receiving a pay rise of 2% to £71,500 and 1PQE lawyers receiving a 4.6% salary hike to £79,000. Linklaters on the other hand announced that a basic salary combined with median bonus for average NQ lawyers and 1PQE associates will stand at £81,000 and £90,000, although high performers can expect to take up to £91,000 and £101,000 respectively.

Pressure on the magic circle to increase NQ pay and capture upcoming talent comes from competition by US firms in London. In April, Sidley Austin increased the salary of all London associates to at least £100,000 to match Kirkland & Ellis’ London rates after acquiring a team of six partners and 14 associates from the firm. In December, Vinson & Elkins became the latest firm to join the ‘100 club’ as it boosted NQ pay by 25% from £80,000 to £100,000. Other firms offering these levels of associate pay include Sullivan & Cromwell (NQ salary: £101.5k), Latham & Watkins (£101k), Akin Gump (£100k), Davis Polk (£100k) and Weil Gotshal & Manges (£100k).

Whilst it is clear associate salaries are on the rise across the City, only time will tell if the Magic Circle and other UK firms can balance their bandings to repel the continuing US encroachment into the London legal market.

2. A glance into the Swiss legal market

Attention has turned to the Swiss legal market over the last few weeks as it was reported Quinn Emanuel and Charles Russell Speechlys have both made advancements in this market. With Quinn Emanuel opening an office in Zurich and Charles Russell Speechlys making three partner hires in Geneva, is the Swiss market gaining global law firm interest?

Quinn Emanuel announced last week they have opened their eighth European office in Zurich by relocating London-based white-collar and corporate investigations partner Thomas Werlen, making them the second US firm to launch a Swiss legal offering this month after Curtis Mallet-Prevost Colt & Mosle opened in Geneva. Additionally, Charles Russell Speechlys made three hires in Switzerland with corporate partner Olivier Cavadini from Python & Peter as well as criminal law partner Bruno Ledrappier and family law partner Grégoire Uldry, both joining from Borel & Barbey.

International firms don’t have much of a presence in Switzerland as they do in other European jurisdictions. The only solid international offering comes from Baker & McKenzie, who are highly regarded across a number of practice areas, whilst CMS, Eversheds and Sidley Austin are also noted for certain capabilities. This in turn suggests that movement is minimal, but areas with the highest number of lateral moves are corporate/M&A and litigation. Eversheds in particular have enhanced their Swiss offering over the last year, hiring corporate partners Daniel Bachmann, Gerald Brei and Urs Reinwald from EY, Homburger and Lenz & Staehelin respectively. White & Case also made a high-profile Swiss hire last September when Anne Véronique Schlaepfer joined the firm as their first Swiss arbitration partner. She joined from leading Swiss firm Schellenberg Wittmer, where she served as their co-head of arbitration.

The gradual influx of international law firm activity could be attributed to their changing banking landscape. With increasing transparency in Swiss banking law, the market is witnessing a rise in the number of cross-border deals, whilst the changes being made to Basel III regulation has also brought about a steady increase in regulatory and compliance work. Although this has made the market more attractive and opened it up to international players, it still holds a number of barriers to entry. A key hurdle for international firms is gaining a strong client base. Newcomers to the Swiss market find it difficult to gain reasonable market share, as clients are focused on maintaining long-term trusted relationships already built with domestic firms.

Since a new unified code of civil procedure was introduced in Switzerland in 2011, which led to all 26 divisions in Switzerland operating under the same civil procedural law, it has provided foreign law firms with an incentive to set up in the region and further extend their multi-jurisdictional presence. The Swiss legal market has indeed proved to be a slow burner, but the potential for business is evident, and levels of activity and sizeable deals continue to become more prominent. It is therefore likely that we will see continued advances from international firms in this small but not insignificant market.

Movers & Shakers of the Week

Appointments

Ashurst makes a number appointments as part of new management structure
Simon Beddow has been named Ashurst’s first London managing partner, whilst other partners across the firm also joined the Ashurst’s management team

BAT choose new head of legal
Formerly head of regulatory and corporate affairs for Western Europe, Benoit Belhomme has been made British American Tobacco’s head of legal and external affairs as well as regional general counsel for Western Europe

Moves

Ashurst appoint a strategic director of corporate lending
Former lawyer Dave Rome has left RBS as their head of EMEA loan markets to become strategic director of corporate lending at Ashurst

Coca-Cola European Partners gain new GC
Clare Wardle picks up general counsel and company secretary role at Coca-Cola European Partners. She was previously group general counsel for Kingfisher

Deutsche lose legal chief and head of active asset management
Emma Slatter, global head of strategy for legal, and James Hooper, head of active asset management, have both left Deutsche Bank this week

Lathams gains leading arbitration partner from US rival
Latham & Watkins has hired arbitration partner Sophie Lamb from Debevoise & Plimpton to sit in their London disputes practice

Norton Rose take on Sidleys’ US public finance team
The whole US public finance team of Sidley Austin has moved to Norton Rose Fulbright, sitting in San Francisco, New York and Washington. the 17 lawyer team includes six partners: Larry Bauer, Matt Hughey, Peter Canzano, Jerry McGovern, Eric Tashman and Cliff Gerber.

Milbank partner joins one of the Big Four 
Partner Laetitia Costa departs Milbank, Tweed, Hadley & McCloy to join PwC Legal as their head of banking & finance in the City

A&O adds to global IP practice
Marjan Noor has left Simmons & Simmons to join Allen & Overy as a patent disputes and regulatory partner

KWM loses German IP partner
IP and IT partner Manuela Finger departs King & Wood Mallesons’ Frankfurt office to join Gowling WLG in Munich

Hogan Lovells builds out Asia capital markets team
Hogan Lovells has added Paul Hastings’ Hong Kong office head Sammy Li and DLA Piper’s head of US capital markets Stephen Peepels to their Hong Kong office

Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.

We are delighted to announce the addition of Max Alfano to the team at Fides Search. Max has developed a great reputation with candidates and clients alike across the Buy Side and brings a wealth of knowledge and recruitment experience to the table. His skill set complements our strategy to be a leading search partner for our clients across financial services.

Max has developed experience working with clients across the spectrum of Legal and Compliance. He brings significant industry experience and an exceptional network. He has developed a reputation as a trusted advisor and fantastic recruitment consultant.

Fides Search saw an opportunity to tap into his knowledge of the buy-side to also support our work with law firms in both consultancy and search work.

‘It has become increasingly important to support clients across the spectrum of legal and compliance. We have also seen an increase in regulatory pressure which is impacting on the Buy side. Max is not only an exceptional addition to the team but he also has a fantastic track record in working with the Buy side and the financial services sector in general. We are delighted to welcome him to the team and look forward to introducing him in due course’. Ed Parker, Director

This week:

Regulation, Funds & Brexit: An Asset Management Commentary

The UK asset management market has seen the greatest number of outflows since the recession in January this year, with investors growing increasingly frustrated with volatile markets. The impending referendum with debating on a potential Brexit has only added to potential woes. Global Stocks dropped significantly with fears of China’s slowing economy & currency depreciations.

Seemingly, with ‘banker bashing’ becoming a subject of a bygone era, focus has turned towards the asset management industry, with the FCA continuing … Click here to read further 

Movers & Shakers of the week 

Appointments

Linklaters vote in new senior partner
Charlie Jacobs has been appointed senior partner at Linklaters, following Robert Elliot’s term in the position

Freshfields appoints three new sector heads
London partner Natasha Good is to become the new co-head of their TMT group, New York partner Valerie Ford Jacob will serve as co-head of the financial institutions group and Brussels partner Rafique Bachour has been appointed co-head of the general industries group

Moves

Weil Gotshal build London corporate practice
Corporate partner James MacArthur leave Herbert Smith Freehills to join Weil, Gotshal & Manges in London

DLA expand Middle East capabilities
DLA Piper has hired Ramsey Jurdi as a partner in their Litigation, Arbitration and Investigations team in the Middle East. Jurdi joins from Chadbourne & Parke’s Dubai office

Linklaters lose three London partners to Kirkland
Kirkland & Ellis has hired private equity partner Stuart Boyd, corporate partner David Holdsworth and private equity tax partner Tim Lowe, all from Linklaters’ London office

A&O strengthens tax practice
Allen & Overy hires Daniela Trötscher in its Frankfurt office as partner. She was previously a partner at Ernst & Young

Office Openings & Closings

Last of the Bingham McCutchen team to move into Akin Gump’s offices
The 21-partner team from former US law firm Bingham McCutchen has joined colleagues from Akin Gump Strauss Hauer & Feld in their offices at Bishops Square in London.

Quinn Emanuel open in Switzerland 
Quin Emanuel has launched their eighth European office in Zurich

Clyde & Co open in Miami
Clyde & Co has opened a Miami office with a five partner litigation team from litigation firm Thornton Davis Fein

Partner Promotions

King & Wood Mallesons promote six in Europe, UK and Middle East, which includes three in London 

The UK asset management market has seen the greatest number of outflows since the recession in January this year, with investors growing increasingly frustrated with volatile markets. The impending referendum with debating on a potential Brexit has only added to potential woes. Global Stocks dropped significantly with fears of China’s slowing economy & currency depreciations. Seemingly, with ‘banker bashing’ becoming a subject of a bygone era, focus has turned towards the asset management industry, with the FCA continuing front to back reviews of firms not least looking at justification for management fees. The continuing struggles of asset managers can be highlighted by the UK firm Aberdeen Asset Management falling from the FTSE 100 into the 250 and assets under management (AUM) dropping by 38bn from last year. So with this in mind, what should the asset management market be expecting over the next year and is it as bleak as it first appears?

The mere thought of a potential Brexit is leaving the markets flat, with the fixed income and equity market’s both underperforming nearly half way through the year. Despite this, several high profile supporters of Brexit have emerged with Alexander Darwall (Jupiter) and Peter Hargreaves (Hargreaves Lansdown) both committing personal funding to the No campaign. Strangely enough, they are not the only two within the fund management world to be in support of a Brexit, with fund managers the largest contributors to the No camp. However, as it is well documented, should a Brexit happen, the distribution of UCITS Funds as European vehicles will have to be re-packaged along with other significant EU Funds. David Harding of Winton and Manny Roman of Man Group see this to be one of the many factors to keep a united Europe and committed significantly to the Yes camp. Conversely, Moody’s have commented that a UK exit “would pose little threat to asset managers’ creditworthiness and have minimal impact on the management of institutional assets.” However, in a time where AUM on the whole is on the decline, a shift in the status quo would surely create more uncertainty in the already volatile markets. Simmons & Simmons noted, in their seminar on the topic, that there are counties (Switzerland / Norway) who hold particular relationships with the EU which allows them to trade as “third-country firms” that may allow for a similar arrangement in the UK. However, no relationship of the sort is promised for Britain and for a No vote on 23rd June would not put the UK at the top of the list to be given any favours by the remaining EU member states. In the same seminar, they also highlighted the capacity of other regulators within the EU, showing how no one nation within the EU could cope with a sudden influx of new registrations, from the sheer volume of financial institutions HQ in the UK.

The regulatory landscape that surrounds many of these issues stands fairly similar to that of last year; AIFMD, UCITS V, MAR, EMIR and MiFID II/ MiFIR is still ever prevalent in everyone’s minds, but for the vast majority there is still uncertainty of what MiFID II will look like. A senior regulatory professional from a global fund when asked on the topic, commented “the biggest change for buy-side firms will be that they have to think like the sell-side” a trait that is not always forthcoming within asset managers in particular.  A recent survey by Funds Europe found that of 50 AM firms, only 18% had begun implementation of MiFID II, regardless of the delay. The same survey also highlighted that the two biggest concerns for asset managers surrounding MiFID II was change to the Distribution Inducement Ban, and wider market infrastructure, both of which drastically change the way business is conducted. Product Governance is also key, however the FINMA has implemented a product governance rule which could be used as a template in an almost blueprint-like capacity. With all regulatory pressures, it can be easy to chastise regulators and condemn them for the over exposure, one global CCO commented recently however that “there will never be a COO or CEO who does not think that there is not enough regulation”.

Like with most challenging markets, there are also opportunities and there has been an increase in M&A activity across the asset management market. Roger Altman of Evercore predicted, whilst speaking to Bloomberg, that there would be more action across M&A market within funds: “It really depends on the type of asset management, because right now you’re seeing big outflows of assets from a lot of big, long-only-centered managers and into passive hands, into index-fund-type hands” Altman said. “But I don’t think it’s surprising to see asset-management transactions. There have been really quite a few of them.” He went on to mention that due to the relative stability there is more openness to change and develop. For example, GAM are currently looking to on-board THS (boutique Fund Manager) and add a potentially exciting other string to their bow. Whilst Old Mutual are looking to sell off their US Asset Management business and set out an IPO for the UK Wealth Management arm.

With performance a major issue for concern, and firms such as Henderson GI, who made the most of good markets in previous years, are now starting to struggle into 2016 – it could be said that they were not looking at contingency plans after squeezing profits in China. Firms, such as Jupiter and Schroders have capitalised on others shortfalls and rallied coming into the start of this year. The impact on hiring has taken an effect across the market, a number of senior redundancies across Legal & Compliance, leaving it fairly flat and new headcount especially across Legal & Compliance being left thin. This is perhaps to be expected with the last couple of years, bringing high levels of hiring within the space, and asset managers in particular looking to hold on to talented individuals and upskill internally.

With the UK asset management industry accounting for a little over 4 trillion in AUM, as well as being the second biggest to the US (30 trillion), it would be difficult to see a complete shift of focus to another European centre should a Brexit ensue. However, there could be a shift from many European and global firms perhaps to hubs like Ireland, Luxembourg or even the Netherlands, whilst also slowing the UK economy at a time when the markets are already proving to be a challenge. Regulation in particular will continue in a similar pattern, with a watchful eye on MiFID II and the impending implementation stage, many commentators also expect closer focus on surveillance as MAR (Market Abuse Regulation) comes into effect. Asset managers remain concerned with spend across legal and compliance departments which has resulted in minimal movement in senior positions, but we anticipate after the annual summer hiring hibernation, markets to rally with more movement at the senior end. Of course if a vote for Yes is the result after 23rd June.

For any further insight or questions on this paper please contact Max at Fides Search, malfano@fidessearch.com :+44 (0) 20 3011 0698