The difficulty in contemplating the consequences of Brexit for our industry is that it’s so much more than just an investment event.
Inevitably, market falls dominated the agenda on Friday – equity market slumps and the pound’s collapse chief among them.
That, though, doesn’t quite tell the whole story: even the domestic-focused FTSE 250, down 8 per cent at the time of writing, is only back to February’s levels.
The huge slump in the pound meant equity market drops were less severe than they might have been, and other asset classes were remarkably calm. TwentyFour Asset Management, for example, noted there were “really very few sellers” in credit markets.
Who’s to say where risk assets go from here, and though the impact on financials and housebuilders was severe, this was not akin to the liquidity or solvency crises seen in 2008. In that regard, it could be argued Brexit is unlikely to bring any more sell-offs of the extent seen on Friday.
But the absence of any further catalyst is a significant issue in itself. As was suggested before the vote, a Leave mandate is just the start of a long, drawn-out process, involving decisions and pathways that have never before been taken.
It’s this uncertainty which must be the biggest concern for fund selectors. There’s a real possibility of the UK enduring a thousand cuts as it gropes its way towards a new settlement with Europe, with other trading partners, and with its constituent countries.
The same goes for the asset management industry. Make no mistake about it, though most fund groups put on a brave face ahead of the vote, senior figures who I spoke to were terrified about the consequences in the event of a Leave vote.
They, too, will now begin down a new road – and are unlikely to wait for departure details to be finalised. Contingency plans, whether that’s creating new EU-domiciled subsidiaries or simply reassessing the outlook for fund flows, will have already been put into practice.
Set all this against the backdrop of an already-slowing economy and the circumstances look worse still. Growth seems certain to suffer further as businesses reassess and political parties face fresh tumult of their own.
The final quandary is the most significant: we still have no idea what kind of agreement will ultimately be put in place. Listening to an initial press conference from Boris Johnson and Michael Gove – who seem the most likely to be making policy in the near future – was enough to indicate they have little idea either. Mr Gove has asserted, contrary to the wishes of his European peers, that the UK does not need to begin the two-year exit process immediately.