Richard Whitehall: It's now been over two weeks since U.K. voted to leave the European Union. A period characterised by uncertainty, political, economic, social and financial.
Well the future now is maybe even more uncertain than usual, we can look back and say how different asset classes have performed and the effects of asset allocation on investor's portfolios.
Currency exposure has been absolutely crucial. The pound has fallen versus the U.K.'s main trading partners and now is around $1.30 having been around $1.45 before the referendum. So foreign currency assets have performed extremely well for U.K. investors.
Some U.K. based assets have lost value as investors have concerns on how the U.K. economy can cope with uncertainty and repercussions if the U.K. leaves the EU. U.K. listed mid-caps for example have on average fallen by around 9%. And many U.K. commercial property funds have lowered their valuations and have also suffered from redemptions as investors have tried to remove money.
In contrast U.K. based assets considered safer have performed strongly. Government bonds which prior were considered already expensive have actually been in high demand, with broad indices returning around 5%. And therefore portfolios have been diversified into overseas assets had exposure to foreign currencies and had allocations to government bonds have performed relatively well. Whereas portfolios that are highly concentrated in U.K. assets have tended to perform relatively poorly.
