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Institutional investors hedge against Brexit

Not only wholesale investors have reduced risk in the run-up to today’s Brexit referendum. Institutional investors, who are supposed to take more long-term views, have also moved to protect their portfolios.


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According to a survey among 53 institutional investors from across Europe, conducted by asset manager NN Investment Partners, 42% of those questioned have taken measures to protect their portfolios against Brexit risk. This is up from just 14% in March.

Surprisingly, the share of respondents who see Brexit as a significant threat to their portfolio is even higher, at 52%. This means 10% of institutional investors are deeply worried about the possible impact of Brexit, but nevertheless haven’t taken any measures to mitigate that threat. Only 12% of investors do not see Brexit as a significant threat to their portfolios. This is down from 28% in March.

NN IP did not ask how investors have been trying to insulate their portfolios from the Brexit threat. But Expert Investor did, and you can read here what hedging measures they have been taking.

‘Think long-term, don’t hedge’

However, co-head of the multi-manager team at London-based asset manager F&C, Gary Potter, believes Brexit-hedging investors are “not sending the right messages to clients“, he said at the Portfolio Adviser Summer Congress last week.

“If you stay the course (…) we come through it and we make money. We’ve got to keep telling our clients that,” he said. “We cannot start pandering to their short term, newspaper-fuelled worries. I’m afraid this industry is letting itself down.”

“History shows us time and time again not to react to situations in portfolio terms based on short-term whims and fancies,” he said, adding, “I totally support that in the short term, there are going to be some winners and there are going to be some losers, but I’m reminded that since 1996, the MSCI Index is up 250% on a total return basis.”