Brexit triggers significant changes in asset allocation
Almost half of respondents to PWM's second annual Global Asset Tracker have reduced exposure to UK stocks
Although, perhaps surprisingly, none of the respondents to PWM's Global Asset Tracker believe Brexit will be the single most important market risk for 2017, the UK’s decision to leave the EU has certainly triggered some key changes in portfolios (see chart).
The most important was to reduce exposure to UK stocks (44 per cent), followed by reducing or hedging UK currency and real estate.
The UK economy has been surprisingly resilient since the Brexit vote, with business confidence bouncing back after an initial slump. “However, 2017 is likely to be more challenging as uncertainty around the Brexit negotiations eventually curbs business investment and a weaker pound boosts inflation, hurting real incomes and consumption,” says Alexis Calla, global head, Investment Strategy & Advisory, Standard Chartered.
The government has cut its 2017 growth forecast to 1.4 per cent from pre-Brexit estimates of 2.1 per cent, although that remains much higher than consensus estimates which see 0.9 per cent growth next year, the weakest since the 2009 financial crisis.
“While we do not consider the UK vote to leave the EU a systemic event, it has the potential to create continuing uncertainty keeping volatility volatile,” states Daniel Brüesch, head of PB Investment Office at Bank Vontobel.
PWM's annual Global Asset Tracker survey is based on interviews with chief investment officers, heads of asset allocation and chief investment strategists of 38 selected, mainly global and regional, private banks. Together they manage more than $7.8tn in client assets globally. For the full results click here.
