18 October 2016

Hedgeweek: Brexit tops list of DFM concerns

Brexit is the biggest investment concern for discretionary fund managers (DFMs) who are particularly pessimistic about the outlook for UK equities in the wake of the EU referendum. 

The interviews, carried out in August, asked DFMs to select the three biggest factors that could negatively impact investments.

The study finds DFMs are pessimistic about the outlook for UK equities following the country’s vote to leave the EU, with two-thirds (65 per cent) believing the decision does not improve the outlook for the asset class in the long-term. But DFMs also appear to accept that Brexit will not have an immediate impact, with just 37 per cent considering reducing their exposure to UK equities prior to the triggering of Article 50.

International equities emerge as the biggest winner, with 70 per cent of DFMs saying they will be the best performing asset class once the Brexit dust has settled. Just 16 per cent of respondents think UK equities will be the best performing asset class post-Brexit. However, this is higher than the combined number that expect alternatives (8 per cent), fixed income (3 per cent) and property (3 per cent) to be the strongest performers, highlighting a preference for equities over other asset classes. 

“The UK’s decision to exit the European Union, combined with a number of economic headwinds, could hit growth hard over the next 12 months,” says Craig Phillips, head of international, CoreData Research. “DFMs acknowledge this and say they are prioritising risk over return as they look to manage clients’ assets across choppy waters.”

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