People head into the Oxford Circus Financial markets fell for the second straight trading day, with London’s FTSE 100 index dropping more than 2 per cent and the pound sinking to a 31-year low against the U.S. dollar.The New York Times
Globe editors have posted this research report with permission of LuxArbor Institutional Positioning. This should not be construed as an endorsement of the report's recommendations. For more on The Globe's disclaimers please read here. The following is excerpted from the report:
A week after the Brexit referendum shock, how did money managers tweak their country allocation?
Before we look at the change in positioning, let's see how equity benchmarks have moved since June 23. The U.K., despite being at the epicenter of the shock, had the smallest impact on its very large stocks. The FTSE 100, which is composed of multinationals that benefit from a weaker pound, is actually up 0.2 per-cent since then. The FTSE 250, which includes more domestic companies, pulled back 7.4% over the period. Equities in the European periphery were much more affected. Italian stocks are down 11.7 per-cent in less than a week.
At the time of the referendum, global fund managers had market weighting in U.K. stocks. Since then, fund managers, on average, have reduced their exposure to an underweight position of 0.6 percentage point. Top-quartile managers (over the past three months), had a more drastic reduction in exposure. They now underweight U.K. stocks by 1.9 percentage point, which is similar to where they were when the referendum was first announced in February. In other words, uncertainty is still present and it is a deterrent to institutional managers.
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