'Brexit' appears to be a growing reality, with a report published on 31 March 2016 by NN Investment Partners finding that 27% of investors believe that the UK will leave the EU - up from the 20% who answered similarly when asked the same question in July of last year.
A further 44% of investors perceived 'Brexit' as a significant or very significant threat to their investment portfolios, whilst one in nine saw it as a 'very significant threat'. However, the number of investors who believed that it would have a beneficial impact on European financial markets increased 3% from 2015 to 2016, to 11 investors, whilst the 60% who were convinced it would have a negative impact was down from 75% the previous year. Over a quarter of respondents were of the opinion that it was unlikely to have any significant impact at all.
Despite the growing conviction that Britain will exit the EU, the report also stated that investors appear unwilling to make the necessary adaptations to their portfolio, with only 14% of investors having established Brexit safeguard measures, whilst 80% claimed that they have maintained their existing positioning.
"Investors appear to be torn between sentiment and rationality when considering a Brexit; while a growing number appear to be bracing themselves for a divorce between the UK and EU, few seem to be preparing their portfolios for this eventuality," explained Patrick Moonen, principal strategist at NN Investment Partners. "While it is widely reported that a Brexit will have negative consequences, it is impossible to predict how bad they will be and whom they will affect. With polls giving little indication of how the vote will go, one thing that is certain is that there will be elements of uncertainty, indecision and even complacency creeping into investors' thoughts as the 23 June approaches".
Investors continue to exhibit the opinion that the best opportunities in terms of risk versus return lie within the US, which was deemed favourable by 82% of those asked and the most attractive region overall by 28%. 73% looked towards Emerging Markets, with the Eurozone in third place with 70%.
"While investors may not necessarily be bracing their portfolios for a Brexit, there does appear to be a slightly more cautious outlook in markets, with a strong preference for defensive sectors," concluded Patrick Moonen. "The fact that commodities remain unloved is at odds with investors' preference for Emerging Market equities and we believe that this defensiveness is, to some extent, reflected in the fact that the US is viewed as the most attractive region".
