State Street Corporation (NYSE: STT) today launched the latest findings from its 'Brexometer Index', a quarterly pulse survey of institutional investor sentiment about the UK's departure from the European Union.
The Q2 2017 survey1 found one fifth (19 percent) of institutional investors plan to reduce their holdings of UK assets over the next six months, a three percent drop from the Q1 2017 survey2.
Other key findings of the Q2 2017 survey include:
- 31% of institutional investors said their firms will likely reduce their operational or organisational presence in the UK as a direct result of the UK government triggering Article 50; 10% said they will increase their presence;
- Potentially unsurprising, more than three quarters (78%) expect Brexit to have an impact on their operating models –down slightly from 80% in Q1 2017;
- A third (33%) of respondents believe asset owners will decrease their levels of investment risk over the next three to five years; 28% think the contrary, expecting an increase in the level of risk amongst this investor type;
- From a macro point of view, 35% of institutional investors have a positive medium-term outlook for global economic growth – up by 2% from Q1 2017.
Michael Metcalfe, head of Global Macro Strategy at State Street Global Markets said:
"The long-awaited post-Brexit vote slowdown is showing tentative signs of appearing in the data, but long-term investors remain optimistic. The majority of our respondents, 65%, still have no plans to reduce their holdings of UK assets in the next six months. And while 78% recognise Brexit will impact their business operating models, less than a third think it likely they will reduce their operational presence in the UK because of it.
The beginning of Brexit would appear to have done little to dent the confidence of long-term investors in the UK, the question now is whether that will last as actual Brexit takes shape during the negotiation process."
Bill Street, head of investments for EMEA at State Street Global Advisors commented, "As far as markets were concerned the trigger of Article 50 itself was a non-event, far more important was the UK snap election announcement on 18 April, which marked a more significant sterling rally. Markets had already discounted tough negotiations and a "hard Brexit," so have welcomed the prospect of a stronger and less-hurried government undertaking Brexit negotiations. Ultimately, the impossibility of mapping out the future state prevents any proper pricing today, but headlines as negotiations progress will continue to spark volatility so investors must remain vigilant."
To view the full research report, click here.
1 State Street Brexometer Index is a quarterly survey conducted by PollRight on behalf of State Street. For the Q2 2017 survey, 101 institutional investors participated globally during 29th March 2017 and 19th April 2017. The research will be conducted on a quarterly basis using the same questions and database to best measure how sentiment towards Brexit is evolving.
2 For the Q4 2016 survey, 111 institutional investors participated globally during December 2016 and January 2017.