28 June 2016
Several clients have called to express their concerns regarding the Brexit vote and its effect upon investment funds and I feel it might be helpful to have the following advice with reference to your investments. Everyone was of course warned of the effect of a Brexit and I do not propose to reiterate media commentaries but to briefly describe below the effect upon the investment markets, which may prevail beyond the short term.
All mixed, managed and distribution funds are balanced and they have been re-balanced to help to mitigate the knock-on effect of the downward pressures upon all investment markets but most particularly the UK equity markets.
Equity funds themselves - in which very few of you are actually currently invested have been exposed to loss of investor confidence in the UK following the results of the EU Referendum. Fixed interest funds and gilt yields have been adversely affected by the lack of global confidence in the UK.
Again, my clients' gilt holdings within the funds mentioned above (and particularly in respect of defensive funds) are already purchased at fixed rates for future years. Current yields are nevertheless lower.
Until we know for certain the route which the UK is going to take and how it is going to cope with where it is going, I do not advise any changes. Having said that, I am not alone in saying that all investors can be best served by the soonest positive action to re-establish the UK's credibility in the eyes of the World. This of course requires a strong leader and government to emerge and I hope that this will happen within the next few weeks rather than months, to give good reason to be confident in UK growth.
At the moment we are facing the possible dissolution of the UK as well as the EU and this destructive uncertainty is worrying for all investors as more stable countries look at the opportunity to lure global investment in their direction. If, therefore, our stability is further questioned, (we have already been downgraded by Standard and Poors) there will be positive grounds for switching your funds to either cash, fixed interest or globally-focused funds with a particular eye towards not only the USA but also China for stability (who may well be the prime beneficiaries of a recession here). On the other hand, it may be said that the growth prospects within the UK itself are better than most alternative trading nations/blocks from this point.
I will of course duly be reporting to you again during the course of the year and as always upon the annual progress of your investments in order to ensure that they are meeting your requirements but if you wish to discuss your current needs or if you feel that a change of strategy for all or part of your holdings would suit your requirements better, then please do not hesitate to call me at any time for further advice.
Michael Forbes Bates CCIBS DipIP PFA CeMap