DFMs reveal which assets will get a Brexit boost

DFMs reveal which assets will get a Brexit boost

Seven out of 10 (69 per cent) discretionary fund managers think Brexit poses a threat to investments, research has revealed.

CoreData Research interviewed 92 discretionary fund managers and found 55 per cent citing weak global domestic product growth at and 52 per cent stating geopolitical instability could harm investments.

Discretionary fund managers were asked in August to select the three biggest factors that could negatively impact investments.

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According to the study, discretionary fund managers are pessimistic about the outlook for UK equities following the county's vote to leave the European Union, with roughly two thirds (65 per cent) believing the decision does not improve the outlook for the asset class in the long term.

The DFMs accepted that Brexit will not have an immediate impact, with just 37 per cent considering reducing their exposure to UK equities prior to the triggering of Article 50, which will kick off the process of the UK leaving the European Union.

A total of 70 per cent of DFM managers said international equities will be the best performing asset class once the dust has settled following Brexit.

In total, 16 per cent of respondents think UK equities will be the best performing asset class post-Brexit.

This is higher than the combined number that expect alternatives at 8 per cent, fixed income at 3 per cent, and property at 3 per cent, highlighting a preference for equities over other asset classes.

A total of eight out of 10 firms said they will prioritise risk within client portfolios over the next 12 months.

Craig Phillips, head of international at CoreData Research, said: “DFMs acknowledge this and say they are prioritising risk over return as they look to manage clients’ assets across choppy waters.”

Jason Witcombe, director at Croydon-based Evolve Financial Planning, said: "It is hard to argue with many of the findings as they are mostly predictions of what might happen in the future rather than what is actually going to happen. None of us has an accurate crystal ball.

"I disagree with the 83 per cent of DFMs who say that active management is essential in the current market.

"An active and personalised approach to risk and reward is essential but my view is that the underlying investments themselves don’t need to be actively managed.

"It is interesting that 82 per cent of respondents see the chase for yield as being the biggest challenge. It concerns me that some investors may take unnecessary risks in the pursuit of high yields, rather than simply accepting that yields are lower than they once were."