Investor disquiet over Brexit grows

The number of investors anticipating that Brexit will have a major impact on their business model grew in the third quarter of this year, according to State Street’s most recent quarterly Brexometer survey.

As the likelihood of a “no deal” Brexit grows ahead of the UK’s departure from the EU on March 29 next year, over a quarter (26%) of respondents said the impact of Brexit on their business would be “significant”.

This is the highest score since the index began and a 12% increase from the second quarter.

Other findings of the Q3 2018 index include:
    •  40% of institutional investors believe asset owners will not change their levels of investment risk over the next three to five years, up 10% since Q2, 2018
    •  Regulatory reporting issues, such as those required under Solvency II and AIFMD, remain the most in-need service (28%) despite having fallen by nearly 10% since Q1 2018
    •  17% of respondents believe fund restructuring is another area that businesses will need the greatest help with following Brexit, overtaking performance and risk analytics which fell to 8%
    •  More than a third (37%) of institutional investors believe their company will use more cross-border fund locations, with locations such as Luxembourg (57%) and Ireland (54%) listed as the most attractive for managers

“The story of Brexit so far is that fears of economic disruption and capital flight have been unfounded and investors have been willing to give the UK the benefit the doubt, said Michael Metcalfe, head of global macro strategy at State Street Global Markets.

“But the closer we get to the key Brexit deadlines without signs that a deal can be reached, the more likely it is these fears will become a reality that investors will need to adjust too,” continued Metcalfe.

The third quarter Brexometer survey polled the opinions of 101 institutional and alternative investors, such as hedge funds, real estate and private equity firms.

©2018 funds europe

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