Two thirds of institutional investors say they will sell UK equities in the event of Brexit.
An overwhelming amount of UK and international investors believe that there will be a negative impact on investment markets should the UK vote to leave the EU.
The research comes from the Investor Relations Society In Partnership with Quantifire whose society has over 750 members from the UK Europe including representatives from a majority of the FTSE 100 have produced a report that was designed to examine the opinions of fund managers and buy-side analysts regarding the likely impact that a Brexit leave would have on investment markets.
In total 407 responses were taken from 361 institutions, including 11 of the top 20 global investors by assets under management.
The Key findings of the report:
- 78% of investors say that the potential for Brexit is now an important factor when making investment decisions
- 88% think that a Brexit would have a negative impact on UK investment markets in the short term
- 64% will reduce or sell UK equities and 54% will reduce their exposure to UK debt securities, if Brexit looks likely
- Financial services and real estate investments are expected to be the main losers if Brexit occurs
- 44% believe that there will also be winners in the UK economy, with exporters and industrials most preferred
- 30% of investors are contrarian, believing that the effect of Brexit would be neutral to positive for UK securities over the medium to long term.
(source: IRS)
As the financial sector is believed to be the sector that is at its greatest risk, several commentators state that the main reaction to the UK voting to leave the EU could be through the currency markets. With an expected drop in value of sterling, it points investors in the direction that the UK exporters would be the most likely beneficiaries.
Commenting on this research, Charles Hamlyn, Managing Director of QuantiFire said:
“The results of our research clearly indicate that risk appetite among institutional investors is very likely to fall if Vote Leave gains ground in the run up to the referendum. Whilst there are conflicting arguments surrounding Brexit, these results underline the fact that uncertainty is never good news for capital markets”.