British funds flee equities and property investments

LONDON: UK investors, gearing for further shockwaves from Britain’s Brexit vote, slashed equity holdings in July to the lowest in at least five years, while almost halving property allocations in their portfolios.

The Reuters monthly survey of UK-based funds, conducted July 15-27, is the first to fully reflect allocation shifts after the June 23 referendum on Britain’s European Union membership that resulted in a win for the Leave camp.

Ripples from the vote are already reverberating through the economy, with big hits to consumer demand and property prices seen tipping the UK into recession.

While the UK-focused FTSE 250 index has recovered its losses over the past month on expectations of more stimulus from the Bank of England, investors are clearly bracing for pain in coming months.

“Financial markets ... have continued to be very generous to global investors over the recent month, even though the economic backdrop, and fall out, from Brexit has been very well documented as bad news for the global economy,” said Peter Lowman, chief investment officer at Investment Quorum.

“However, alongside these uncertainties came the normal response from the leading central banks as they spoke about the possibility of additional loose monetary polices, to assist the global economy, and the prospects for other actions such as helicopter money.”

The latter was a reference to central banks deliver- ing money more or less directly to consumers.

Rattled by the prospect of more turmoil ahead, UK asset managers ramped up safe haven bond allocations, which jumped by 5 percentage points to 30.7 percent — the highest level in at least five years.

This came at the expense of equity allocations across global balanced portfolios, which were slashed to 42.6 percent from 47 percent in June while exposure to property nearly halved to 3.8 percent from 6.5 percent the month before.

Property investments had come into sharp focus following the referendum when more than six British property funds suspended withdrawals to tackle a tide of redemptions by investors unnerved that the uncertainty would hit demand to rent and buy commercial property.

Fund managers polled by Reuters were also divided over whether global bond yields had bottomed out.