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Do UK equity fund managers think Brexit will impact their funds’ performance?

3 October 2018

Over two fifths of UK equity fund managers expect their performance to be affected by Brexit, a new survey by Square Mile has found.

In a survey of UK equity funds with a Square Mile fund rating, 42% expect their performance to be sensitive to the outcome of Brexit negotiations, while 32% thought it would not be possible to determine with any accuracy how their fund’s relative performance would be impacted. A further 27% said they expect their performance to be broadly unaffected.

Just one in 10 (10%) suggested a hard Brexit would be the best outcome for the performance of the FTSE All Share Index over the next year. A much greater 39% were in favour of a soft Brexit, while 13% said it didn’t matter and 39% said it was impossible to know.

Jason Broomer, head of investment, Square Mile Consulting and research, commented: “Clearly the variety of responses underlines quite how complex this issue is and how uncertain the outcome will be. Markets have had two years to consider the impact of Brexit and the valuation of many stocks discounts the worst case scenario so the impact may be more muted than in 2016.”

Broomer said that while many managers were in support of a soft Brexit, this is clouded by sterling’s reaction on the foreign exchange markets. Sterling is expected to drop in value in the event of a hard scenario and this would boost the value of revenue from overseas. With nearly three quarters (70%) of FTSE 100 sourced from overseas, Broomer cautioned it could have an offsetting impact.

“There is of course a third potential outcome to the Brexit negotiations, and that is there is no Brexit. This could be a risk to many funds relative positioning and a reversal of the market moves in June 2016 seem a realistic possibility,” added Broomer.

Square Mile fund manager survey responses

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