Let the dust settle and search for opportunities in the short-term

Added 24th June 2016

In the uncharted territory of the post-Brexit landscape, fund managers are keen to avoid overreacting to the initial devaluation of sterling and take advantage of lower priced shares and sustainable dividend growth.

Let the dust settle and search for opportunities in the short-term

Most fund managers can agree that volatility in the short-term is likely to persist, though, they express varying degrees of confidence in the UK economy’s ability to bounce back.

However, with little precedent of what to expect in the coming months, what steps are fund managers taking now as far as their investment strategies are concerned?

Take a step back from the market noise – Owen and Klempster

Glyn Owen, investment director, and James Klempster, head of portfolio management at Momentum Global Investment Management, said they are unlikely to deviate from their normal outcome based investment approach post-Brexit.

“As outcome based investors we are well positioned to take a step back from market noise and position the funds for the right reasons, namely to add value for clients on a through the cycle basis,” the duo said.

“Today we have added back the risk we sold as the market opened because we believe that, in the long term, the prospects for the UK market remain attractive, especially given the large proportion of profits in the UK’s main board that are generated overseas.”

“We have been positioned for a low but positive growth environment and we continue to believe that this is appropriate. We are underweight government securities on the basis that these are extremely expensive, but we mitigate this position with allocations throughout the credit spectrum including investment grade, high yield, convertible debt and emerging markets debt. We have a neutral allocation to global equity markets but within that we are underweight the US due to its relatively high valuation and overweight Europe, Japan and the UK,” Owen and Klempster added.

Don’t get caught up in the voting machine - Husselbee

Liontrust head of multi-asset, John Husselbee, said there’s no point giving into short-term anxiety following the vote if it means abandoning a tried and true long-term equity strategy.

“We feel any overreaction to Brexit risks getting caught up in Benjamin Graham’s short-term ‘voting machine’ when we should be looking at the long-run. Our portfolios are stress tested and constructed to seek maximum returns for a given range of target risk. Graham’s weighing machine favours equities being held over the long term and the biggest risk to any investor is abandoning a long-term strategy based on short-term anxiety,” Husselbee urged.

“If any assets are hit particularly hard in the coming weeks, we would look to exploit this short-term anxiety as a cheap entry point for securities with good long-term prospects,” he remarked.   

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