Global asset owners bracing for Brexit impact
Four in five institutional investors are expecting an impact on operations from Brexit, according to a survey conducted by State Street.
The company quizzed 111 asset owners and alternatives managers from around the world about their attitudes to the UK’s expected departure from the EU.
The survey forms the basis for State Street’s new Brexometer study – a quarterly gauge of views and strategies relating to Brexit.
Almost one-third of those surveyed said they would require more help to navigate the regulatory implications of Brexit.
Jeff Conway, chief executive for Europe, the Middle East and Africa at State Street, said investors expected Brexit to hit “a range of operational issues”.
“Many appear well prepared for Brexit and are proactively putting strategies in place to mitigate any ensuing impact,” Conway added.
While almost two-thirds (63%) of investors said they planned to maintain their existing investments in the UK, almost half (48%) said they expected the overall level of investment in the UK economy to fall in the next quarter.
Longer term, 31% of respondents said asset owners would cut the amount of risk in their portfolios over the course of the next 3-5 years.
However, one-quarter said asset owners were likely to increase risk.
Michael Metcalfe, head of global macro strategy at State Street Global Markets, said a weak currency had aided inflows into UK assets in the six months since the UK voted to leave the EU.
“Foreign institutional equity investors are particularly strong buyers of UK equities of late,” he added.
The FTSE 100 gained 19.5% between 24 June and 13 January, when it hit a record close of 7,337.8.
The FTSE 250, which is more domestically tilted, gained 15.8% in the same period.
A Fidelity survey of its own regional analysts revealed that 60% believed Brexit would have a “moderately negative” impact on their companies.
Almost half (49%) of the company’s European analysts said their companies were “less willing” to invest in the UK over the next two years while the Brexit negotiations took place.
This week has seen UK prime minister Theresa May give her first public speeches about her hopes for Brexit negotiations with Europe.
EU leaders have warned that discussions will be difficult, and that the UK cannot expect to be better off outside of the union.