Brexit Update

The UK’s exit from the EU is a process. The resulting changes to policies and laws will take some time to come into effect.

In contrast the uncertainty the exit brings is immediate and listed asset and currencies have fallen sharply in response. 

Uncertainty will cause a real economic impact, as individuals and firms consider their options and in all likelihood defer decisions such as hiring and investment.

This economic impact will not be confined to the UK, as debate will now focus on cohesion within the EU, with the speculation as to terms of continued participation.

The falls in today’s equity markets will be reflected in our unit prices released on Monday afternoon.  As unit holders, the desire to react will be amplified by the uncertain climate, fanned on by media hyperbole.

We would urge you to consider the following:

• Indiscriminate selling will create opportunities as not all business will be equally affected.
• Stock prices will be heavily influenced by recency bias.  As we have just witnessed a large shock, the market may exaggerate the probability of future tensions in the EU.
• Events will not unfold in a linear fashion.  There is potential for positive surprises, such as infusions of liquidity and further out, the prospect of greater fiscal spending by EU governments to augment monetary policy.
• Across our Funds there is cash and shorting, which will provide some mitigation to the market falls (see table below - net exposure). 
• Our overall stock exposure to the UK is low as is our exposure to the pound.    
• With some of the steepest falls, we have started to accumulate.

DISCLAIMER: The above information is commentary only (i.e. our general thoughts). It is not intended to be, nor should it be construed as, investment advice. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Before making any investment decision you need to consider (with your financial adviser) your particular investment needs, objectives and circumstances. The above material may not be reproduced, in whole or in part, without the prior written consent of Platinum Investment Management Limited.