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Brexit critic’s investment firm increases exposure to UK

Brexit critic’s investment firm increases exposure to UK

The wealth management firm co-founded by anti-Brexit campaigner Gina Miller has upped its exposure to UK assets, as the country’s exit from the EU draws closer with the prospect of a no-deal becoming more likely.

Ms Miller, who has been vocal in the media and also initiated several legal challenges to the government’s policy of exiting the EU, is co-founder of London-based wealth management firm SCM Private with her husband Alan.

In her latest update to clients of the firm, covering the month of July and published on August 29, Ms Miller wrote: “Within the equity portfolio we increased exposure to undervalued UK blue chip equities together with a global ETF investing in securities selected according to fundamental measures of value. 

"We took advantage of the reduced differential between short and longer term bonds, by increasing our weighting in sterling denominated short term bonds that hold bonds with an average yield of 1.6 per annum whilst also investing in a  sterling hedged Emerging Market Sovereign Bond ETF that holds bonds with an average yield of 4.8 per cent per cent.” 

UK blue chip equities will be companies listed on the UK stock market but may be international companies with little actual exposure to the UK economy.

Around 70 per cent of the earnings of companies in the FTSE 100 are derived from overseas, and the value of those earnings rises if sterling falls due to the favourable exchange rate.

The sterling denominated bonds are exposed to the UK economy due to movements in the currency.

Denominating the emerging market bonds in sterling means receiving the income in sterling and the weaker the level of sterling, the lower the returns. 

Speaking to FTAdviser following the publication of the note, Ms Miller said: “We never combine any personal political views with investment views.

"The investment team's view is that UK equities are significantly undervalued against their international peers, whilst the significant overseas exposure and attractive dividend yields offered by the UK blue chip stocks should serve to protect investors should some of the more adverse Brexit related scenarios take place.”

But Edward Park, deputy chief investment officer at Brooks Macdonald, takes a different view on UK stocks.

He said: “Domestic focused UK stocks have underperformed international peers as the heightened risk of a no-deal recession begins to be priced into markets.

"With the outcome of Brexit remaining volatile and unclear, sterling will remain under pressure and trade within a range that reflects the dual possibilities of a deal and a disruptive exit.

"As a result we maintain our underweight to UK assets despite the valuations on offer.”

Ms Miller is currently taking the government to court over prime minister Boris Johnson's decision to suspend parliament in September. 

 david.thorpe@ft.com