24th June 2016
British investors may want to look for funds that help them ride volatility give the vote to leave the European Union says Darius McDermott, managing director of Chelsea & FundCalibre.
He says: “This is a defining moment in our history – not least because the polls were right and the bookies were wrong! In terms of stock markets, we could be in for a few difficult hours, days and months. Buckle up. It could be quite a ride.
“Markets will now look to our politicians to see how they will deal with the situation – what plans they have to make this work. Also crucial will be the Bank of England’s response to huge moves in the pound. We don’t want knee-jerk reactions from parliament. What we actually need is for our leaders to be sensible, rational and show us some stability.
“So markets are likely to be volatile in a general downward direction for a while, not helped by the fact that there are other big issues in the world that could also have an impact: China slowing, the US election and now possible contagion of Brexit to Frexit etc….
“But the world won’t end. And as we know from quite recent experience, markets bounce back and good companies continue to thrive in the longer term. I would actually even be tempted to buy into the market dips – not huge amounts, but small lump sums.”
He says the following three funds may be worth a look.
Blackrock Gold & General
Gold is a hedge against uncertainty and there is likely to be a lot of uncertainty in the coming months. Other EU countries may demand their own referendums. Volatility is likely to increase. On top of this, the global economy is fragile. Some exposure to a gold equity fund should help hedge against these risks. The BlackRock Gold & General fund has a very long track record and is managed by mining specialist, Evy Hambro.
Premier Defensive Growth
This is an absolute return fund that seeks to deliver positive returns in all market conditions. The fund is unlikely to shoot the lights but has consistently delivered a good return in a wide variety of market conditions. It could be a good option for an uncertain world where cash interest rates are close to zero. The fund has an excellent record of protecting investors in falling markets.
One for those who want to be a little bit more contrarian. This is a core UK income fund that has relatively little domestic UK exposure. The fund invests in very high quality defensive companies. Top holdings include Unilever, Diageo, Sage, GlaxoSmithKline and AstraZeneca. These stocks might get caught up in an initial sell off but they could actually benefit from a weaker pound. These are large global companies which a significant part of their sales outside the UK. If sterling remains low for some time, this could actually lead to their earnings going up.