Survey shows global investment professionals believe Brexit would impact UK asset values

Tuesday 14 June 2016

  • UK portfolios expected to be impacted negatively over one year
  • 81% of respondents expect a fall in the UK stock market with 39% expecting a sharp decline
  • More than 70% believe that Brexit would lead to sterling depreciation

The CFA Society of the UK and CFA Institute have asked CFA Institute’s global member base to forecast the potential market impact of a British exit from the EU. The purpose of the survey was to understand global investors’ views on the likely impact of a Brexit vote on UK and other markets.

More than 1,750 investment professionals participated in the survey, with more than 75% of respondents based outside the UK; 71% of respondents believe that a British exit from the EU would have a negative impact on UK portfolios over a one-year timeframe. Within this group, 16% believe that it would be very negative; 8% of respondents feel that the impact would be positive with 3% unsure (17% believe that the impact on client portfolios would be minimal).

Says Will Goodhart, Chief Executive of CFA UK:
“Both UK and non-UK respondents believe that a Brexit vote would have a negative impact on UK asset values on a one-year basis. UK respondents feel this more strongly, but it is interesting that qualified investment professionals from around the world – with no emotional involvement in this issue – also strongly believe that a Brexit vote would be against UK clients’ interests over that timeframe.”

Says Paul Smith, CFA, President and Chief Executive of CFA Institute:

“The responses from members around the world are consistent with those from our members in the UK, albeit less marked. While it is impossible to predict the outcome of the referendum, a vote for the UK to leave the European Union would have a negative impact on clients’ interests according to the survey’s respondents. Asset management and asset management clients are global in their aims, and in the event of Brexit, it will make it more difficult for businesses to operate globally. In the interests of putting investor interests first we feel that these results are an important contribution to the debate.”

The effect of Brexit was seen by 81% of respondents as likely to have a negative effect on the UK stock market over a three to six month period: 42% of those polled predict a ‘moderate decrease’ with a further 39% foreseeing a ‘sharp decrease’; 12% of respondents believe that a Brexit vote would lead to an increase in UK equity market values.

More than three quarters (78%) of those polled anticipate that a decision to leave would lead to sterling depreciation of more than 5% (against a trade-weighted basket of currencies); 19% expect a depreciation of more than 10%; 8% believe that the pound would be stronger as a result of a Brexit, with 12% seeing little to no change and 3% unsure.

69% of respondents predict that a vote to leave the EU would lead to an immediate increase in benchmark 10 year UK Government bond spreads over German Bunds, with over a quarter (26%) believing that this could be between 10 and 20 basis points and 21% expecting it to be over 20 basis points. 10% of respondents believe that bond spreads would tighten in the event of a Brexit vote.

Adds Will Goodhart, Chief Executive of CFA UK:
“The survey’s respondents typically believe that in the year after a vote for Brexit, sterling would weaken, relative Gilt values would fall and so would the value of the stock market in the UK. If that came to pass, those who hold investments in their pensions or elsewhere would be hurt by the decline in the value of their assets. These views are shared by both UK and non-UK respondents. They are more strongly held by respondents based here, but respondents from other international markets also believe that Brexit would be bad for UK clients, UK assets and sterling with a knock on effect running into other markets.”

About the survey:
The survey was undertaken between 7 and 13 June 2016. 1,774 people completed the survey (972 from EMEA – including 377 from the UK, 477 from the Americas and 325 from APAC).

Download the survey response data here