According to new EU Referendum research from mallowstreet, the biggest concern for the UK pension industry is that a ‘leave’ vote would cause negative portfolio returns and result in a prolonged period of uncertainty.
This latest survey from mallowstreet, the platform bringing the institutional pensions industry together to help solve the pensions and savings crisis, was conducted towards the end of May with a diverse group of pension professionals from its 3,000-strong community of key stakeholders. With two weeks to go until the Referendum on the 23rd June, these survey results underline how this concern over potential market events is playing out.
When asked how they think Brexit will affect their scheme’s investment portfolio, 1 in 2 (51 percent) believe any resulting impact would be quite negative, predicting up to 10 percent loss on the assets in their portfolio, while 5 percent believe their portfolios would suffer a loss greater than 10 percent. 1 in 10 (10 percent) predict a positive impact (potentially generating 5 percent additional returns), and a third (32 percent) foresee no impact.
Table 1: How do you think BREXIT will affect your scheme’s investment portfolio?
In terms of key investment concerns, respondents were asked to highlight their top three. Once again, top of the list is market volatility, with 1 in 4 (26 percent) citing this as a concern, next is political uncertainty (21 percent), followed by exchange rate volatility (18 percent).**
This latest survey from mallowstreet follows research on the EU Referendum in May, which found that 3 out of 5 solutions providers, trustees and consultants said that they wanted to remain in the EU.
Stuart Breyer, Chief Executive Officer, mallowstreet said: “What is clear from this second survey is that the industry is in limbo and will remain so until the results are announced. Only then, if we end with a Brexit, will we see the real impact. Anything else is impossible to predict, which is not a comfortable position for trustees and sponsors to be in when making crucial long-term planning decisions around their pension fund’s investment strategy.”
* mallowstreet EU Referendum Research conducted with over 120 pension industry stakeholders within the 3,000 strong mallowstreet community, from a diverse mix of solutions providers, consultants and trustees. The research was conducted between 13 May and 24 May 2016.
** Full List of Key Investment Concerns
1. Market volatility: 26 percent
2. Political uncertainty: 21 percent
3. Currency/exchange rate volatility: 18 percent
4. Long term lower growth: 16 percent
5. UK Recession: 15 percent
6. Loss of access to investment talent: 4 percent
The Results – Executive Summary
- 70 percent of respondents say that there will be an increase in costs to doing business in the event of a ‘leave’ vote
- 60 percent of corporate sponsors conduct more than 25 percent of their business in Europe
- 55 percent say their biggest concern is the impact of uncertainty on markets and ultimately pension fund investment portfolios
- 40 percent of respondents say a ‘leave’ vote will make it more difficult to do business with Europe
- In the event of BREXIT, 42 percent believe UK equities will be the worst performing asset class, followed by 27 percent who believe the worst performing asset class will be UK property
- 56 percent believe that BREXIT will have a ‘quite negative’ or ‘very negative effect’ on their pension funds’ portfolio
