The UK’s vote to exit
the European Union has already prompted global investors to reconsider their allocations
to the country’s private markets, according to a survey.
More than 40% of
institutional investors surveyed byPreqin planned to invest less in the UK in the next 12 months. Private
markets allocations were more likely to suffer than hedge funds, the data firm
“In the longer term,
more alternative investors are seeking to reduce exposure to UK investments
than are seeking to increase exposure,” Preqin’s report stated. “However, the majority
believe there will be no change to their UK investment activity over the longer
Almost a quarter (24%)
of asset owners said they would invest with fewer UK-headquartered fund managers
“in both the short and long term,” the report added. No investors said they
would increase their allocation to UK-domiciled managers.
(63%) of all hedge funds operating in Europe are based in London, according to the
data firm, accounting for $427 billion of assets. Private markets managers in
the UK manage $490 billion, compared with $333 billion run by continental managers.
Most investors felt there
would be no performance impact to their alternatives portfolios in the next 12
months, although more than a quarter said the impact would be negative.
Hedge fund managers were
more positive about their performance prospects in the wake of the referendum
result, Preqin also found. Almost a quarter (23%) of hedge fund managers the
firm surveyed believed the outcome would be positive for their investments in
the long term. Only 9% of managers of unlisted assets concurred with this view.
Meanwhile, the immediate
performance impact is all too apparent for many pension funds. The aggregate
funded status of pensions linked to S&P 1500 companies fell from 79% to 76%
during June, according to Mercer, primarily due to the impact of Brexit on
markets and discount rates during the last few days of the month.
This marked a $70
billion increase in the aggregate shortfall of these plans during the month,
Mercer said. Since the end of 2015, this shortfall grew by $164 billion to
hit $568 billion at the end of June.
“In the two
trading days following the Brexit vote, we saw funded status fall a full four
percentage points before a partial recovery before month-end,” said Matt
McDaniel, partner at Mercer. He argued that “plan sponsors need to monitor
funded status regularly, ideally on a daily basis.”
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Up to a Different Europe