Heartwood gives its views on implications of vote

27th June 2016

Noland Carter, chief investment officer at Heartwood Investment Management, gives his reaction to the UK leaving the EU and the likely implications.

The UK electorate has voted to leave the European Union in a once in a generation vote. We believe the likely implications are:

Since the beginning of this year, we have been reducing risk in our portfolios to reflect concerns about a number of issues, including Brexit, and we have entered this period with higher levels of cash. In light of the current environment, some of the actions that we are considering are to:

  1. Reduce exposure to European equities. The euro currency has been resilient, which in the short term should help to mitigate potential market losses for sterling investors, but we are very aware of the ongoing political risk in Europe.
  2. Explore opportunities in UK property. UK listed property developers have fallen by as much as 30% this week and this plus the sharp fall in sterling could stimulate international investor flows into this market.
  3. Potentially add to Fed-sensitive assets such as US treasuries and emerging market sovereign debt (denominated in US dollar), as we expect the Fed to remain dovish.
  4. Re-orientate our existing UK exposure into large-caps. These are multinational companies with significant international earnings and should benefit from a weaker sterling.

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