60% of institutional investors expect their asset holding to remain the same
about 12 hours ago
Brexit negotiations won’t have an effect on markets until 2018, State Street said. Photograph: iStock
A majority of investors still have no immediate plans to change the holding of their UK assets in the aftermath of Brexit, a survey shows.
The quarterly Brexometer index from asset manager State Street shows that while there has been a slight decrease in confidence, some 60 per cent of institutional investors expect their allocation to stay the same, an increase from last quarter.
However, the volume of those who believe Brexit will have a significant impact on their operating models increased to 22 per cent of respondents while 27 per cent suggested that asset owners would decrease their levels of investment risk over the next three to five years.
“The clock continues to tick on Brexit, but there remains limited evidence that financial markets or their participants are discounting a worst-case outcome,” said Michael Metcalfe, head of global macro strategy at State Street.
“Our metrics suggest that the majority of investors still have no immediate plans to change their holdings of UK assets. This has not changed even though the Bank of England (BoE) is expected to reverse its precautionary interest rate reduction this month and sterling’s under valuation has halved over the quarter,” he added.
The asset manager’s head of investments for Europe, the Middle East and Africa, Bill Street, advised that the ongoing Brexit negotiations won’t have an effect on markets until 2018 when the outline of a transitional and permanent agreement become clearer.
“Sterling in particular has risen from its lows earlier in the year. This partially reflects US dollar weakness but also greater than expected resilience from the UK economy and expectations of a rate rise by the BoE. However, it still remains undervalued against most currencies and is likely to continue to show volatility while Brexit uncertainty remains,” Mr Street added.
State Street’s quarterly index surveyed 100 institutional investors between the end of September and the middle of October to measure how sentiment toward Brexit is evolving.