How investors cashed in from Brexit bounce
THE stock market may have kept calm and carried on in the year following the Brexit vote, but investors could have got more bang for their buck by investing on the continent.
Today marks the anniversary of the day the UK found out it voted to leave the European Union, surprising both the country and financial markets.
The performance of the economy since then has surpassed the expectations of many, with the FTSE recently breaching the 7500 mark.
The presence of many internationally focused firms means UK markets have been boosted by a fall in the pound. This comes despite ongoing interest rate uncertainty from the Bank of England and continuous warnings of post-Brexit chaos from economists and politicians. Indeed, yesterday the FTSE 100 closed at 7424.13 despite Brexit negotiations beginning on Monday and ongoing uncertainty around the future of the Government.
Had you invested £100 in the FTSE 100 a year ago you would now be the proud owner of £123 – a decent return of 23pc. This compares to a 17pc return for the FTSE 250, and 26pc for the FTSE Small Cap index.
But these returns pale in comparison to those offered by international markets.
Most notably, the MSCI Europe Ex UK Index – which comprises all of the biggest firms on the continent – has returned 39pc since the referendum, turning £100 into nearly £140. The CAC 40 in France has returned 41pc, while Germany’s DAX30 has returned 44pc. If these results are anything to go by, it seems our European cousins have been the real victors of the divorce battle so far.
The S&P 500, America’s main stock market, has returned 38pc since the vote, boosted by Donald Trump’s US-centric economic policy. Japanese markets have returned 41pc, meanwhile, and emerging markets 45pc.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: ‘The performance of capital markets over the past year tells us that the financial effects of Brexit are about as predictable as the British weather. Investors should therefore stick to proven means of building up a decent nest egg, by maintaining a diversified portfolio.’
For those deciding on whether to invest in European or UK funds, number-crunching from Chelsea Financial Services reveals a fairly bleak picture for old Blighty.
Just nine UK equity funds made the top 100 across the two regions since the Brexit vote, in terms of percentage returns, and only two UK funds make the top ten.
These are the Old Mutual UK Smaller Companies Focus fund, managed by Daniel Nickols, and the TM Cavendish AIM fund, led by Paul Mumford, which have returned 55.5pc and 51.2pc respectively.
The best performance across European and UK funds, meanwhile, comes from the Henderson European Smaller Companies fund, run by Ollie Beckett and Rory Stokes, which returned 56.6pc.
It was closely followed by the Neptune European Opportunities fund, managed by Rob Burnett, which returned 55.8pc, and the Marlborough European Multi-Cap Fund, managed by David Walton and Will Searle, which returned 55.7pc.
Darius McDermott, managing director of Chelsea Financial Services, said: ‘Despite UK equity markets holding up surprisingly well in the year since the EU referendum, and continuing to reach all-time highs, European markets have done even better.’