Of particular concern here, are the arrangements for asset managers to delegate portfolio investment and risk management functions across borders to entities in other jurisdictions. This has become a central element of the asset manager business model and is now an international norm. The existing EU delegation regimes allow European investors to access investment opportunities around the world, as well as allowing foreign investors to add European exposure to their portfolios while maintaining the management of their total portfolio in another jurisdiction. It has very probably helped UCITS funds become a global investment brand. The pooling of asset management through delegation enables asset managers to benefit from economies of scale to meet cost pressures, delivering higher returns on investment. It allows investment firms to access global markets and the best available talent in terms of investment professionals in those markets for the benefit of all investors, regardless of where those markets and that expertise are based. The concentration of asset management activities in particular centres can enable specialisms to develop. For example, analysis suggests that UK-managed funds domiciled in the rest of Europe may be 21  These estimates have been made for the EEA given access rights operate across the EEA. Given the size of economies within the EEA but outside the EU, the estimates should hold for the EU. 11  All speeches are available online at www.bankofengland.co.uk/speeches  11  more focused on non-European assets, such as emerging markets, when compared with such funds managed in other EU countries.
10  For example, foreign currency debt securities were at the heart of the Latin American debt crisis in the 1980s in which bond investors played a significant role in volatile capital flows and ultimately in sovereign crises. 11 Recent Bank research shows that during the 2013 ‘taper tantrum’ asset managers sold bonds as prices fell, perhaps exacerbating the episode. See Czech and Roberts-Sklar (2017). 12 Whilst price-based measures of liquidity in fixed-income markets, such as quoted bid-ask spreads, are in line with historical standards, volume-based measure have deteriorated. In US and UK government bond markets, turnover ratios have declined materially since pre-crisis. In corporate bond markets, average large trade sizes have fallen. US corporate bond dealer inventories are over six times less than before the pre-crisis period and Sterling and US corporate bond inventories have been steadily declining since 2011. 13 Bank of England Financial Stability Report, Box 2, December 2015 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  It is also less clear now that other investors like pension funds and insurance companies would come in to stabilise a falling market in the way that they may have done in the past. A Bank of England-led study in 2014 found evidence that in some instances, insurance companies and pension funds might indeed act pro rather than counter-cyclically in a severe episode of stress, selling into a falling market.