Asset managers should have plenty of time to prepare for the likely loss of passporting rights in the wake of the Brexit vote, according to analysts at RBC Capital Markets.

In a note to clients, managing director Peter K Lenardos wrote that post-Brexit changes to passporting, which allow UK fund managers to market and sell products in the EU and vise versa, will be long-dated, allowing ample time to implement any necessary changes.

“As it currently stands, UK-based fund managers typically market UK-domiciled unit trusts to UK investors and Luxembourg-domiciled  SICAVs to European investors,” said Lenardos.

“It is likely that the biggest disruption that asset managers will face from Brexit will be added legal and compliance work, and the costs associated with this.

“While UK investment firms will want to continue to access EU investors, EU investment firms will be just as keen to continue to access UK investors in our opinion.”

Therefore, he reckons the current UK-based funds for UK investors and mirror-image Luxembourg-based funds for EU investors are likely to remain unchanged.

The current passporting arrangement allows asset managers to manage Luxembourg-domiciled funds from the UK and market and distribute these products across the EU.

“While the timing and outcome of the Brexit negotiations are unclear, it may be that asset managers will need to establish more substantial European subsidiaries to continue their current arrangement, which would increase the cost of doing business," Lenardos adds in his note.

“Further, the EU is gradually introducing third-country (non-EU) company access to EU markets, which may mitigate long term implications of the Referendum vote.”

Across the asset management sector, RBC has conservative investment performance assumptions mainly due to the uncertain  outlook for economic growth and foreign currency movements.

Preferred  names in the sector  include  Jupiter,  Man  Group  and  Schroders. Lenardos believes that Aberdeen and GAM are fairly valued, while Ashmore and Henderson are over-valued.

“Our main concern for the sector as a whole remains valuation, especially given an uncertain market outlook, lackluster flows, rising  costs of compliance, various regulatory reviews, ongoing  pressure on  revenue  margins  and  the  increasing popularity of passive investments,” he added.