InvestmentsJun 27 2016

Brexit shock should not lead to rushed decisions

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Brexit shock should not lead to rushed decisions

Immediately after the vote results were announced, FTAdviser Advantage’s poll, ‘Where are clients likely to put their money over the next few months?’, revealed client’s intentions.

Advisers responding online indicated their clients were shying away from the volatility of markets towards ‘safer’ asset classes.

According to the poll, which appeared on, 42 per cent suggested clients might be heading towards cash as a haven asset, while 33 per cent would head towards overseas equities.

Source: FTAdviser Advantage

There was a flurry of active trading in physical gold over the week leading up to the EU Referendum, with BullionVault’s customers trading £23.5m of vaulted gold and silver overnight in some 1,500 deals between 23 to 24 June.

This helped push the price of gold up overnight, its fastest ever move, leaping to new three-year high of more than £1,000 an ounce.

Despite this, advisers have not seen clients heading to gold, according to the FTAdviser Advantage poll, although David Jane, manager of Miton’s multi-asset range, believes gold is a good portfolio diversifier at this time.

He said: “Our approach throughout this period, consistent with our philosophy, has been to prioritise capital preservation, with little exposure to either potential outcome.

“We have had material exposure to gold, core government bonds, high quality investment grade corporate bonds and defensive equity. These positions are helping protect capital.

“On the flip-side, UK equity (especially domestic focused) and UK property is detracting from performance.”

But gold investment, especially investment in companies in the gold and mining sector, requires expert attention, according to Thomas Holl, a director at BlackRock.

In his blog post, he wrote: “In an Olympic year, it seems appropriate that gold has raced ahead.

“The metal appreciated by 22 per cent in the first three months of this year, its strongest quarter for 30 years, driven by sharply higher demand as a safe haven amid the volatility experienced so far this year and expected in the months to come.

“But compared with the share prices of gold miners, physical gold is some way off the pace: the FTSE Gold Mines index surged by 94 per cent in the first four months of the year.

“As investors in gold equities, this naturally makes us assess whether the miners’ valuations have become stretched. The rally means that stock selection will be critical.

“We have instead maintained our quality bias across the portfolios, sticking with companies that have strong management teams, premium assets, and robust balance sheets.

“So even in a grandstand year for gold equities, investors should remember not every stock will finish on the podium: an active long-term approach is as important as ever.”