The most widespread concern among professional investors
about the effect of Brexit is its potential to impact operating
In Q4 2016 80% voiced concern in a State Street survey of
institutional investors and alternatives managers, including
11.8% that said the impact would be very significant or
The figure is also increasing, up from 76% in Q3 2016 when
the first Brexometer Index survey was completed.
Jeff Conway, EMEA CEO at State Street, said: "Our findings
show that institutional investors expect Brexit to have an
impact on a range of operational issues, and subsequently we
have seen an increase in clients looking to address
"Many appear well prepared for Brexit and are proactively
putting strategies in place to mitigate any ensuing
The 111 investors surveyed around the end of 2017 were,
unsurprisingly given the incoming requirements, interested in
more third-party support for regulatory reporting: 31.8%
envisaged increasing needs, a figure that was also up on the
The other areas where most respondents envisaged needing
support were performance and risk analytics
(14.5%), currency overlay strategies (11.8%) and
fund restructuring (also 11.8%).
Institutional investors were unconcerned about the effect on
investment performance: 63% expected to
maintain their holdings in UK equities, bonds and/or
alternatives over the next six months, with 12.7% expected to
increase holdings and 16.3% expecting to decrease holdings.
Despite this, almost half (48%) expected investment in the
UK to fall during Q1 2017, albeit down from 52% in the
preceding quarter. Almost a third (31%) thought that asset
owners will decrease investment risk over the next three-five
years and 26% thought they would increase risk.
Michael Metcalfe, head of global macro strategy at State
Street Global Markets, said: "Questions over timing of the
UK’s ultimate split from the EU and the nature of
their future relationship still linger and have the potential
to weigh on both the economy and the pound.
"Nevertheless, thus far at least, the extremely gloomy
pre-Brexit predictions for the UK economy and asset markets
look well off the mark."
Sterling weakened sharply following the vote and fell
sharply again in October. However, it has been more stable
James Binny, EMEA head of currency at State Street Global
Advisors, added: "The weakness benefitted UK based clients who
were not hedged. However, we have seen increased hedges from
existing currency overlay clients – both into passive
and more dynamic approaches – as well as more
enquiries from clients who haven’t managed
"For some this is simply driven by a desire to reduce risk
when other asset return expectations are lower, but also UK
based investors who have gained from sterling weakness and so
are seeking to lock in those profits."