More than a third of investors believe there will be an increase in merger and acquisitions (M&A) activity within the fund management sector, mainly driven by European fund managers who wish to obtain a stake in UK-based firms following Brexit.

The survey conducted and published by State Street showed 34 percent see M&A fund activity increasing in the UK. The survey is called ‘The Impact of Brexit on the UK fund management industry.’

The survey found that the main reason behind the non-UK based fund managers wishing to expand their operations in the UK post Brexit is the belief it holds a large amount of investment management expertise and knowledge.

The size and growth expectations of the UK market was the second main reason.

Over half (55 percent) of respondents think the UK authorities will make it more appealing to open up London offices after Brexit.  Also 15 percent are under the impression that non UK European based fund managers who already have offices in the UK will recruit more employees to their UK operations.

Just under a quarter (24 percent) hold the belief that more European based fund managers aim to open offices in the UK after Brexit.  As well as 22 percent believing Asian and US fund managers will open more offices in the UK.

State Street also found that “the fund structures that investors believe will prove the most popular for European and other foreign fund managers looking to expand their UK operations include Investment Trusts (44 percent), Unit Trusts (21 percent) and OEICs (20 percent).”

However, the survey found that only 9 percent believe fund managers are contemplating launching a UK fund range to bolster its existing UK investor range in their non UK based European fund ranges.

Brian Allis, head of State Street Global Services’ EMEA product team said: “Our research suggests that, despite the headwinds and complexity that Brexit is causing, the UK is still a hub for a tremendous amount of investment management expertise, and an attractive centre for fund management activity in Europe.

“It is reassuring to see that, however negative the outlook for the UK fund industry may be right now, investors still want to maintain and grow their presence locally.”

The report surveyed 100 institutional and alternative investors comprising hedge funds, real estate funds and private equity firms to analyse the outlook for the UK fund management industry after it finalises its exit from the European Union.

State Street has $2.81 trillion in assets under management.