Diversity is key to riding out Brexit storm

SuterLaura

The EU referendum has been the hot topic since the start of the year, with a plethora of commentary, news pages and debates from both sides.

As the 23 June vote date has neared, the rhetoric from both the Remain and the Leave camps has grown increasingly more headline-grabbing and, at times, desperate. With warnings of world wars, GDP plummeting, the UK financial services sector crumbling and a mass departure of companies, the “In” campaign has certainly caught the attention of voters.

But what does the referendum actually mean for end investors’ portfolios? There’s no doubt that sterling has borne the brunt of the uncertainty leading up to the vote, with it now being viewed as undervalued by a large number of investors.

“Waiting on the sidelines may not be the worst thing to do.”

However, it seems that investors are holding back on moving into the markets in the lead-up to the vote. The recent Bank of America Merrill Lynch fund manager survey showed that investments into UK equities had fallen to a seven-year low, to levels not seen since the financial crisis. What’s more cash levels have risen. Property sales, both commercial and residential, have also stagnated, according to estate agent reports.

Waiting on the sidelines may not be the worst thing to do. So many elements of the EU referendum are unknown, not just the binary outcome itself, but also the implications of a vote either way.

One fund manager recently told me he had been looking, perhaps frantically, for the ideal play on Brexit, a long-short position that would work in either outcome. But it doesn’t exist, he says.

Instead, managers say a well-diversified portfolio, allocating to nimble managers that are alert to opportunities in either outcome are all investors need. That and a steely nerve to ride out the uncertainty.