The Brexit Effect

What Does Brexit Mean for Your Investments?

Over the weekend, we saw a continuation of the political fallout following the Friday morning’s announcement of the referendum results. The charge, started by David Cameron’s resignation, is now followed by a coup in the Shadow Cabinet. Further developments are expected throughout the week.

As we know political events and personalities are not the primary drivers of long-term investment performance. Instead, we turn our attention to the markets. Discounting our individual views on what caused the majority leave vote, we look ahead in to the future, what this result means for investors and how True Potential prepared for such an outcome.

Diversification in Action

Diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk.

Our view has always been that global diversification through multi-asset funds is the most appropriate way to invest. A single country fund has nowhere else to go when domestic conditions become challenging. A multi-asset fund can, and will, look to employ money in the most suitable markets to both protect and grow wealth. In the lead up to the the present situation, True Potential fund manager partners have been scaling down their UK exposure and investing in overseas markets. Our True Potential Wealth Strategy funds have given investors a good level of protection, insulating them from the worst of Friday’s market reaction to a result that took many by surprise. Our Managed Portfolio Series takes diversification to another level as we build on the strong foundations of opportunity across global markets and the skills of our world-class investment partners.

We believe that once the dust settles, the vote will weaken the UK economy in the short-term and we will see a continued volatility with both positive and negative news being amplified through stock prices. However, attention will rightly turn again to the fundamentals:

• Global valuations look reasonable
• The US economy remains stable and in good health
• Investors with both asset class and currency diversification have insulation against the current chill

Market Movements

Moving onto current news, markets today are seeing positive gains from both Europe and the UK, with central banks now looking to step in to stimulate the global economy. It is important to note that central banks have been preparing for this scenario and they have the tools necessary to protect global growth.

Active Asset Management

Active investment managers can make a real difference, as we have seen in our fund performance. Now is not the time for complacency or passive resignation to events. Strong leadership is required followed by decisive action and this is demonstrated in our funds and portfolios.

The key message here is to remember the importance of adequate diversification of funds which are not restricted within UK equities. It is important to invest in both a broad range of geographical areas and a broad range of asset classes, some of which act as safe havens for investors during current events.

 

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