Brexit prompts risk rethink for investors

UK decision to leave the EU is driving more conservative behaviour for investors.
By John Bakie
Investors are reducing their risk appetite in the wake of Brexit and the global uncertainty it has caused, according to research by NN Investment Partners.

NN’s Risk Rotation index saw a significant reduction in risk appetite when it surveyed firms in August 2016, two months after the UK voted to leave the European Union.

Almost a third of institutional investors said they had less appetite for investment risk over the past six months, with 8% stating their appetite has significantly decreased. However, 23% said their risk appetite was on the up and the majority say they have maintained their position.

This was almost the reverse of NN’s March 2016 study, when 29% said their risk appetite has increased while only 23% said it had decreased.

Brexit is identified as the key culprit, with 32% citing it as a very significant concern to their portfolios and 18% saying it was slightly significant. The Eurozone crisis also continues to influence investors, with 41% identifying it as significant.

Patrick Moonen, senior strategist, multi-asset at NN Investment Partners, said: “Markets are currently facing several headwinds, with a number of different geopolitical tensions affecting investors’ confidence for the future. As we enter this  period of uncertainty it is more important than ever for investors to be able to highlight pockets of opportunity so as to capitalise on the existing market uncertainty.

“With the ramifications of Brexit set to continue for the foreseeable future, it is clear that more and more investors are adjusting their risk profile to protect their investments from market volatility resulting from these developments. The research also reveals that those who have a more negative outlook on the impact of Brexit are also more likely to have decreased their risk portfolio, with half of respondents who viewed Brexit as a ‘very significant’ risk also stating that they had decreased their exposure to risk.”