Brexit and Diversification

Since the UK electorate’s decision to leave the European Union (EU), the past 17 or so months have been interesting ones, to say the very least, for UK equity investors, and none more so than for those of us focused lower down the market capitalisation scale.

But the UK market is a diverse and internationalised one and, somewhat surprisingly perhaps, the FTSE 250 index among others, generate around 40% and 50% of their collective turnover from overseas earners. As such, our view of the world is still firmly coloured from a global perspective.

Many Investment managers like to look ahead and hold a 12-month view of the prevailing global economic and financial market conditions. And according to many, on current evidence, relative to history, we are in the midst of a period of reasonable if not spectacular growth. The US, China, Japan and, belatedly, the Eurozone, are all showing signs of increasing momentum.

By contrast, commentators feel that the UK looks stuck in the limbo of a rather slower pace of growth. Brexit-related uncertainty does now seem to be weighing on consumption and investment across the UK economy and, anecdotally at least, international investors are being put off by the apparent lack of progress in the UK’s exit negotiations.

All of which I would suggest, are good reasons for using the Multi Manager Diversified approach we use with the vast majority of our clients.