Diversifying your portfolio in the wake of Brexit


With Brexit now less than a year away, how inward-looking are your investments? Diversifying your portfolio could be the answer.

Brexit – or more accurately the start of the transition/implementation period of the UK leaving the EU – begins on March 29, 2019. By the end of the following year, the UK’s remaining links to the EU are due to be cut.

Since June 2016, when the Brexit referendum took place, the FTSE 100 has been one of the world’s poorest performing major indices. So it’s perhaps no coincidence that, in March 2018, a survey by the Bank of America (BoA) of 163 global investment managers found the UK stock market was least popular of 22 wide-ranging investment asset classes.

If you live and work in the UK, then naturally you’ll tend to think in terms of UK-based investments, be they shares, bonds or property. The BoA survey is a reminder that taking such a narrow view of investments may come at a price.

Portfolio diversification is one way in which investment professionals could limit risk and potentially increase returns. For example, the most recent report from the Pensions Regulator showed that in 2017 the average UK defined benefit pension scheme had only one fifth of its total shareholdings in UK quoted shares.

Albeit not suitable for everyone, it’s worth considering what international investments can offer:

  • Access to industries not represented on the UK stock market
  • The opportunity to benefit from different economies and different stages of the economic cycle, e.g. emerging markets (both are especially important when UK economic growth is forecast to remain weak)
  • Exposure to foreign currencies, which could provide an additional boost to returns when sterling is weak, as it was in the 12 months following the Brexit vote

There are many ways to increase the international element of an investment portfolio, whether it is held directly or via an ISA or pension arrangement. At AFH, we hold client assets across several geographical locations, and our in-house investment and research teams work hard to ensure client portfolios are sufficiently diversified to match investment goals and objectives.

This article is for generic information only and should not be deemed as a recommendation on how to invest. The investment strategy proposed for you will be based upon your personal financial situation and risk tolerance. Please contact us for financial advice before proceeding with any course of action.

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