We use cookies to support features like login and allow trusted media partners to analyse aggregated site usage.
To dismiss this message and allow cookies to be used, please click "Continue".

Continue

Features

Twitter board

Follow us
  • My week on Twitter 🎉: 4 New Followers. See yours with https://t.co/mCw3VcMQGw https://t.co/odYllgQghg21 hours ago
  • Friday View: Border to Coast launches UK equity tender - Rentokil Trustee faces fine - Gleeson directors banned - P… https://t.co/wx2SJ0bGfG3 days ago
  • Shareholder engagement: It’s good to talk For responsible investors talk isn’t cheap. Not only does research sugges… https://t.co/imwrezJuKJ3 days ago
  • Friday View: PA's DB scheme signs buy-out deal - PIC invests in Midlands housing association - Newton Video on Emer… https://t.co/GbWDdyENlN10 days ago
  • RT @minerva_ESG: Hey, all #ESG and#corpgov tweeps, lend a hand to @portfolio_inst important opportunity to support investors' understanding…10 days ago
  • We want to know your appetite and understanding for ESG! Please click the link to take our 5 minute survey to tell… https://t.co/SsVgQzEKIc11 days ago
  • RT @AonRetirementUK: Great event, thanks for hosting @portfolio_inst. Inspired location too! https://t.co/we7Ou46ns311 days ago
  • Full house at our Portfolio Prepared event, Oliver Hamilton Illiquids specialist @AonRetirementUK discusses conside… https://t.co/F0qPFPjUSP11 days ago
  • West Midlland Pension Fund’s Jill Davys: “I am reluctant to overpay for assets” Assistant director of investments a… https://t.co/YHtEIU5BSN14 days ago
  • Friday View: DWP plans £1m fine for "reckless" sponsors - Veolia appoints actuary - TPR fines Smart Pensions - UK s… https://t.co/9kUsw6mric17 days ago
  • RT @NewtonIM: Take 5 minutes to complete the @portfolio_inst ESG survey, which is part of its 'Raising Standards in ESG' initiative, and sh…17 days ago
  • This months cover story: Carillion: Lessons for trustees ''The collapse of the construction giant raises questions… https://t.co/L48HDqT0lB18 days ago
  • RT @PensionsSion: Portfolio Prepared? Join us and @portfolio_inst on 4th July 2018 to hear presentations from leading professional #trustee…18 days ago
  • Breaking: DWP proposes £1m fine for "reckless" DB sponsors https://t.co/7rsDaGgS5v #DWP #DBWhitepaper #TPR https://t.co/YQqy9Qr7tN20 days ago
  • Our latest Roundtable: Factor Investing ''Pursuing value, momentum, quality or low volatility strategies in bond an… https://t.co/qugefevAN420 days ago
  • My week on Twitter 🎉: 2 Mentions, 3.3K Mention Reach, 5 Likes, 6 Retweets, 7.76K Retweet Reach. See yours with… https://t.co/IZfviidt4H21 days ago
  • Friday View: Trustees feel the heat over climate change - bankers' pensions back in black - TPR suspends trustee -… https://t.co/kUKa8QUF9w24 days ago
  • Increased regulatory oversight will be risk-based, TPR keyperson will meet schemes deemed riskier several times a y… https://t.co/wUiKPGESaU26 days ago
  • Lesley Titcomb, TPR chief executive says change is on its way, the regulator will increase oversight between valuat… https://t.co/Wu8Pv6TfqS26 days ago
  • Join us and @AonRetirementUK on the 4th of July at the luxurious Victorian Bath House featuring educational presen… https://t.co/r1abr8Qls027 days ago

Strategy

What would a Brexit mean for investors?

What would a Brexit mean for investors?

Tuesday 24th May 2016

With the UK's future in Europe to be decided next month, what would its departure mean for investors? Emma Cusworth finds out.

As the UK’s ‘in’ or ‘out’ vote on membership of the European Union on 23rd June looms large over the domestic market, the polls remain deadlocked and the outcome will be a close-run race.

While many in the city maintain a core ‘in’ scenario, the chances of an ‘out’ vote have increased and investors need to carefully consider the consequences of leaving the EU on their asset/liability mix.

Uncertainty is the name of the game. No country has ever left the EU before, so there is little real understanding of what to expect following a ‘no’ outcome. The nearest comparison would be Greenland’s 1985 ‘soft’ exit that left it as an associate member, still subject to EU treaties, but the UK would be highly unlikey to accept a similar arrangement.

The lack of a recent precedent leaves it very unclear what the consequences of a Brexit would be.

UNCERTAINTY IS THE ONLY CERTAINTY

Roger Bootle, managing director of Capital Economics, speaking at the Pensions and Lifetime Savings Association Investment Conference 2016, said: “The fact of the matter is there aren’t facts. There are assumptions, there are views, there are factoids you can push or bend in a certain direction, but this is not something where you are going to get the objective truth.”

Capital Economics’ analysis of various surveys into the economic effects of Brexit revealed a 22% difference in projected gross domestic product (GDP) between the most extreme views. The high level of uncertainty this gap reveals is itself having, and will continue to have, an interesting effect on institutional investors, both on the asset and liability side of their balance sheets. And not all of that is bad news.

Bill Street, head of investment (CIO) EMEA at State Street Global Advisors, says the referendum is “undoubtedly the key risk event facing the UK this year”.

He adds: “The perceived risk of Brexit is likely to generate increased uncertainty in the markets, adding to current market concerns.”

Uncertainty manifests itself through greater volatility and an increase in the riskpremium demanded by investors, which, in turn, pushes down asset prices.

STERLING JITTERS

As the most liquid sterling asset, the pound is first to suffer the effects of greater uncertainty and has already taken a beating. Immediately after the Prime Minister’s announcement of the referendum date at the end of February, sterling fell 0.9% to a seven-year low against the dollar. It has since recovered some of those losses, but is clearly sensitive to the on-going Brexit issue.

GBP pairs dropped some 7% over a period of six weeks when David Cameron first promised to go to referendum, according to Clear Treasury, and Boris Johnson announcing for the ‘out’ campaign on Sunday 21 February saw GBP pairs almost 1% lower versus their Friday close.

Jean Medecin, member of the investment committee at Carmignac, believes sterling remains the “weakest link where Brexit is concerned”. “It’s already softened as the prospect of Brexit seemed to increase. If that trend continues sterling will suffer more,” he says.

Page: 1 2 3
0

Leave your comment

View our comments policy

Please login or register with us to leave a comment. It's completely free!

Friday View

Friday View

Shareholder engagement: