Commenting on the opinion by the advocate general of the European Court of Justice that the UK should be able to withdraw its notice to leave the EU without the need for permission from the EU or other EU countries, Trevor Greetham, Head of Multi-Asset at Royal London, said:
“The probability of the UK remaining in the EU has just increased. With Brexit events moving at such a startling pace and less than a week to go before Parliament votes on Theresa May’s Withdrawal Agreement, investors should ensure their portfolios are prepared for every eventuality.
The advocate general’s preliminary ruling suggests the UK could hold a referendum on the final deal and remaining on current terms is a real possibility.
On the other hand, with Theresa May’s Withdrawal Deal unlikely to pass in parliament, the probability of the UK leaving with No Deal has also increased markedly. We’d expect sterling to rally strongly if the UK remains in the EU but to suffer sharp declines on a disruptive and economically damaging exit. With this in mind, it’s not surprising that sterling volatility is at its highest level since the 2016 referendum.
Swings in the pound can have a very large impact on investment returns. Investors with a low appetite for risk should avoid high levels of foreign currency exposure while we balance equity exposure with commercial property in multi asset funds for investors with a higher appetite for risk. Equities should do better on a disruptive exit with a weak pound. We’d expect property to do better if the UK stays in or close to the EU.
Seems like there’s still all to play for. From an investment point of view, Brexit is about risk control rather than trying to predict the outcome.”
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About Royal London Asset Management (RLAM):
Established in 1988, Royal London Asset Management (RLAM) is one of the UK's leading fund management companies, providing investment management solutions to both wholesale and institutional clients such as not-for-profit organisations, local authorities and the insurance sector.
RLAM manages £117 billion of assets and employs 89 investment professionals. It invests in all major asset classes including UK and overseas equities, government bonds, investment grade and high yield corporate bonds, property and cash.
For professional clients only, not suitable for retail investors.
Issued September 2018 by Royal London Asset Management Limited, registered in England and Wales number 2244297; authorised and regulated by the Financial Conduct Authority. Registered Office: 55 Gracechurch Street, London, EC3V 0RL.