There are only two things people are writing blog posts about this week – Leicester City or Brexit

May 6, 2016 Categories: Investment Strategy

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“I don’t like football”. There I’ve said it. (You see where this might be going). My eldest son, however, is big into his football, watching, playing, and talking about it.

So my Saturday mornings are spent at the side of a football field pretending to concentrate and offer the occasional words of encouragement.

Last weekend though, I left him playing and headed to the high street to run a few errands and get a decent cup of coffee. The campaigners were out in force, set up either side of the road with flyers and banners proclaiming the relative merits of voting to remain in or leave. I spent a bit of time on both sides of the road and it confirmed exactly what I had thought all along. I have no idea which way the vote will go.

On the global stage, market volatility is here to stay, and the EU referendum adds a bit more fuel to the fire for UK investors. Volatility can present challenges and opportunities – as an active manager, volatility is not simply something to be feared but sometimes, volatile market conditions are exactly what are required to generate returns.

Trying to predict the result is not something that I’m spending any time on. For me, what is important is to consider how we can prepare our clients’ portfolios and be ready to react and respond once the outcome is known. We are big proponents of diversification but it is not enough on its own. Options are great tools to manage risks and reap rewards but pricing has moved in many UK asset classes. The focus is on ensuring the liquidity, infrastructure and scenario planning are all in place to respond to evolving market conditions in a very uncertain world.

Like many others, I recently wrote a paper on our thoughts around the EU referendum and how investors can and should prepare for either outcome. While this doesn’t try to predict who will win, it does describe some of the possible scenarios that might unfold and offers thoughts on how to prepare in advance to manage risks and exploit opportunities.

This coming Saturday morning, it’s the cricket pitch. Deck chair, paper, coffee, and some words of encouragement. Much more my thing.

In my next blog I will discuss potential implications for portfolios as discussed in my paper.

David Rae, Head of Client Strategy & Research

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