ANNOUNCEMENT: Expert Investor is now PA Europe. Read more.

M&G Prudential spends €32m preparing for Brexit ahead of demerger

Prudential’s life and asset management business eyes opportunity in private markets

M&G Prudential spent £27m (€31.5m) on Brexit-related costs in the latest financial year as it shifts funds to Luxembourg, hitting operating profits within Prudential’s asset management business which is currently in the process of spinning out from its parent company.

Prudential’s full-year results for 2018 revealed its UK and European asset management businesses’ operating profits fell 5% to £477m in 2018. M&G funds under management increased marginally from an average level of £275.9bn in 2017 to £276.6bn in the latest results with revenue margin increasing to 40 basis points over that period from 37 basis points.

Total net flows within the group’s global asset management businesses were £11.5bn.

Within M&G Prudential, the majority of outflows, which totalled £9.9bn, were accounted for by the redemption of a single £6.5bn institutional mandate, which the results described as low margin. A difficult market backdrop for both equities and fixed income accounted for the remaining outflows, the results said.

Performance fees, which had been abnormally high in 2017, also contributed to the fall in profits within asset management. In 2018, performance fees contributed £15m, a normal level according to the results, compared to £53m the previous financial year.

The Brexit bill was attributed to staff costs and the cost of migrating fund assets to the Sicav platform so European clients can continue to access the asset manager’s products following the UK’s exit from the European Union. M&G announced it was transferring £34bn worth of assets to Luxembourg in May 2018.

An M&G spokesperson told Expert Investor’s sister publication Portfolio Adviser the shift of assets provides opportunities for the business beyond Brexit. She said: “Our enhanced Sicav fund range and Mifid distribution platform mean we can go deeper into Europe and offer a greater breadth of investment opportunities to clients globally, including traditional and alternative, public and private investment capabilities. As well, it brings our product range in line with our client’s investment vehicle preferences.”

M&G Prudential demerger

Overall, operating profits were up 19% at M&G Prudential, hitting £1.6bn in 2018 compared to £1.4bn the previous year.

Group chief executive Mike Wells says the UK and European life and asset management businesses are on track for its demerger from the global business. The holding company for the new business has been established and the group has raised £1.6bn in subordinated debt to support the capital rebalancing of the two businesses.

The High Court has also granted the first stage of approval for the transfer of part of the M&G Prudential annuity book to Rothesay.

Wells said M&G Prudential was consolidating its position as one of the leading businesses in the UK & European savings and investment markets.

“The intended demerger of M&G Prudential from Prudential plc will further enhance the strategic focus of both businesses. I am confident that, given the extent of our opportunities and our proven ability to execute and innovate, we are well positioned to continue to grow profitably.”

M&G eyes opportunity in private markets

Private markets were singled out in the results as an area of opportunity for M&G Prudential.

Currently, the business has £59bn in private assets under management and is one of the largest private credit investors in the world.

It is looking to expand its capabilities across new geographies and asset classes. “M&G Prudential, which already has established international distribution, a clear focus on customer solutions and a broad-ranging investment capability, is transforming itself to meet this opportunity,” the results said.

The UK’s pension freedoms were also highlighted as an opportunity as were the total value of cash deposits in European Union households, which currently sits at €10trn.

A new partnership with Tata Consultancy Services signed in 2018 would enhance service for UK and Europe savings and retirement customers, the results said.


For more insight on UK wealth management, please click on


  • Can M&A and buybacks breathe life into UK market?

    Can M&A and buybacks breathe life into UK market?

    Both buybacks and M&A should help realise value in UK shares, boosting prices and giving investors another reason to consider the UK stockmarket Not only does M&A activity appear to be picking up, with a high-profile bid for UK electronics retailer Currys, but the scale of company buybacks continues to accelerate. If it goes well,…

  • Capital Group launches multi-thematic Article 8 funds

    Capital Group launches multi-thematic Article 8 funds

    Capital Group has launched a set of multi-thematic sustainable funds that are available for investors in Europe, writes Christian Mayes. The Capital Group Sustainable Global Opportunities fund (LUX) will invest in global equities, while the Capital Group Sustainable Global Corporate Bond fund (LUX) will target fixed income exposure. The launch also includes a multi-asset offering…

  • Bond funds pull in €29.7bn in January – LSEG

    Bond funds pull in €29.7bn in January – LSEG

    Bond products were the best-selling asset class in January, according to LSEG Lipper’s European Fund Flow report, writes Christian Mayes. The asset class pulled in a net €29.7bn in the month, while Money Market USD grouping was the best-selling Lipper Classification after receiving €11.2bn inflows. Providers of mutual funds pulled in €22.5bn, while passives saw net…

  • Quarter of Article 8 funds at risk of greenwashing – MainStreet Partners

    Quarter of Article 8 funds at risk of greenwashing – MainStreet Partners

    A quarter of all Article 8 funds could be accused of greenwashing based on their sustainability framework and practices, according to MainStreet Partners, writes Christian Mayes The 24% of funds classified as a greenwashing risk by the 2024 ESG Barometer report marks a four percentage point increase from the 20% flagged at the end of…

  • EU green rules could stymie decarbonisation projects – ExxonMobil

    EU green rules could stymie decarbonisation projects – ExxonMobil

    The European Union’s climate regulations may lead to it halting its investments in Europe, ExxonMobil has warned. Speaking to the Financial Times, Karen McKee, president of the product solutions division, said the oil and gas giant had struggled to begin decarbonisation projects in Europe due to the regulatory burden. The result, she added, was that…

  • ICE flags need for Europe to double green investment

    ICE flags need for Europe to double green investment

    Investments to modernise energy and transport must double by the end of the decade to reach 2030 climate targets, the EU has been warned. According to the Institute for Climate Economics (ICE), which has released the European Climate Investment Deficit report, the bloc lacks what it calls a “consistent tool” to ensure monitoring of the…