Magazine Issues » February 2019

Opinion: Bring me your worst ideas

Fiona_RintoulAs a pension fund manager said to me recently, all those “best ideas” funds on the market make you wonder what you’re getting when you buy other funds from the same firm. So-so ideas? A few good ideas and some rubbish ones? Worst ideas?

There’s so much in a name, and the flipside of a cracking marketing slogan can be a very dark place indeed. That dank, unimagined hellhole is where we now find ourselves, as the interminable Brexit negotiations tear our lovely continent apart.

“Take back control.” “Believe in Britain.” “Leave means Leave.” The Leave campaign dedicated to taking the United Kingdom out of the European Union has all the best slogans. Scratch beneath the surface and what do you find? A nice selection of the UK’s worst ever ideas. Xenophobia. Nostalgia. Self-delusion. All entirely unleavened by any contact with facts.

“After we leave, it [the EU] will only represent 60% of Europe,” tweeted one Brexiter beside a graph showing the UK accounts for 16% of the EU’s GDP. Here in Brexitlandia, the agenda is being driven by people who think that 100 – 16 = 60, that Ireland might like to leave the EU with the UK, that you can fit a square peg in a round hole. To quote Ireland’s foreign minister, Simon Coveney, the UK’s negotiating tactic is now to say, “Unless you give me what I want, I’m jumping out the window.”

Pretty much everyone has given up pretending that Brexit is anything other than a catastrophe. Even UK government proponents of this lunatic stab in the dark can’t come up with a cheerier slogan than: “We’ll survive it.” The moral of the story is: if you think the answer to the question might be a load of unintelligible gibberish along the lines of ‘I don’t want that, but I don’t know what I do want,’ then don’t ask the question.

So, as one institution after another flees London for Dublin and Luxembourg, where does this leave our European fund industry? Has all that work standardising fund structures and facilitating cross-border marketing been for nought? Well, no. The EU27 will have each other, and UK groups will still be keen to flog products to mainland Europeans, though they’ll have to find new ways to do so. Perhaps the biggest losers will be UK savers. The UK has always been a difficult market to crack.

Brexit could make it impossible for some providers, reducing savers’ choice.

Then there is the question of UK assets and the UK’s place as a financial centre. Some are making the case that UK assets and sterling are undervalued. “Investors have pulled an estimated £11 billion out of UK equity funds since the Brexit vote,” says Victor Hill, macro strategist at Master Investor. “The question is, with the London market yielding nearly 5%: is this now the moment to get back in?” Well, I dunno. With a no-deal Brexit in the air, I’m dusting down that North Korean equity fund prospectus.

Meanwhile Jordan Hiscott, chief trader at Ayondo Markets, tells me he would characterise the possibility of Britain leaving the EU with a no-deal as a “grey swan” event. “To leave a trade pact that has been in place for over 30 years would have a severe and detrimental effect on sterling,” he says. “For London as a financial centre, the impact would also be catastrophic.”

I’m sure he’s right. But no one in the UK government is listening. Dizzy with the absurdity of it all, they’re too busy trying to create their own “best ideas” funds. Look at my zippy idea that bears no relation to anything that is realistically possible! Technology! Canada plus! A customs union, not the Customs Union! As the saying goes, if these are their best ideas…

Fiona Rintoul is editor-at-large at Funds Europe

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