Malaysia News: Sovereign wealth funds are shunning British investments after Brexit

Isnin, 5 Jun 2017

Sovereign wealth funds are shunning British investments after Brexit

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LONDON — The UK has slipped to become least attractive developed market for sovereign wealth funds one year after the 2016 Brexit referendum, according to a survey by asset manager Invesco.

A survey of 97 sovereign wealth funds, pension funds and central banks with a combined $12 trillion (£9.32 trillion) in assets rated the UK 5.5 out of 10 for investor attractiveness, down from 7.5 in 2016.

Germany was the most attractive market in Europe, with a score of 7.8, while Italy and France followed with 6.1. The US was the most attractive place in the world to invest, earning a rating of 8 out 10.

Around 41% of respondents said they would seek to reduce the level of investment in the UK, while 54% said they would wait until the long-term impact of Brexit becomes clearer before making any decisions on asset allocation. Only 5% said they would seek to add new UK assets to their portfolio.

Funds with UK assets have been stung by a fall in the value of the pound by around 20% since the 2016 referendum on European Union membership. Political uncertainty, with Britons set to go to the polls for a major vote for the third time in two years this week, remains high, as does uncertainty over the kind of trade deal the UK will sign with the EU once it leaves the 27-nation bloc.

Whether the UK will get a trade deal with the EU at all is still in doubt, which could have devastating effects on the economy. Failing to strike a deal with the EU will lower income per household by at least £1,890 a year, according to research by the London School of Economics published last week.

The LSE’s Centre for Economic Performance said that returning to World Trade Organization rules would reduce the UK’s trade with the EU by 40% over 10 years.

Sovereign funds were found to prefer real estate as a safe haven asset with more than two-thirds of respondents owning more than their standard allocation of real estate. Just under half said they expect to maintain this position in 2017.