Roundtable

Multi-asset

Understanding all the options The UK’s decision to leave the European Union on 23 June threw financial markets and domestic politics into turmoil. On the day following the referendum, the FTSE 100 shed £120bn as investors panicked over the uncertainty of the UK’s future. This was exacerbated by David Cameron’s sudden resignation as Prime Minister having led an […]

September 2016

Understanding all the options

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The UK’s decision to leave the European Union on 23 June threw financial markets and domestic politics into turmoil.On the day following the referendum, the FTSE 100 shed £120bn as investors panicked over the uncertainty of the UK’s future. This was exacerbated by David Cameron’s sudden resignation as Prime Minister having led an unsuccessful bid for the UK to remain in the EU. On 6 July the pound sunk to its lowest level against the dollar in 31 years shortly after the yield on gilts dropped to below 1% (0.8%) on 27 June. Despite this, investors piled into gilts as a safe haven, a move which pushed UK scheme liabilities to record highs throughout June. In central government resignations, cabinet reshuffles and chaos within the opposition party created further uncertainty around the direction of the country. A new Prime Minister in Theresa May helped calm markets somewhat, but opacity remains over the negotiations around, and triggering of, Article 50.Across Europe big elections are expected next year in France, Germany and possibly Italy and The Netherlands. In global financial markets, Swiss government bond yields took a hit on the news of Brexit, as did US bonds.This culmination of events and consequences has seriously skewed the market’s perception of political risk in developed and emerging markets. Certain developed markets, usually seen as politically sound, have been aggressively dragged into a state of future uncertainty. Some believe Brexit could pave the way for further disruption across Europe, such as the rise of anti-establishment political parties and even the potential break-up of the eurozone.Institutional investors have always had to deal with volatility in their portfolios and the ‘low rate, low yield’ saga has been playing out for some time. However, with the country’s future hanging in the balance following Brexit, these two factors are now front and centre of portfolio management and now more than ever, investors need to safeguard against market shocks. Step forward multi-asset funds which purport to achieve equity-like returns, but with lower volatility and downside protection. However, despite these claims, events like Brexit don’t come around all that often and even the steeliest of funds will have been stretched. Many believe this calls for dynamic portfolio management, but investors need to understand the what, how and why of these strategies before investing.This roundtable discussion, featuring an expert panel of asset managers and consultants, considers the role of multi-asset funds by analysing the effect of Brexit, looking at the correlation between asset classes and how dynamic management is the best approach.

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