How fund managers are reacting to Brexit shock

The managers of our sister magazine Money Observer's "Growth" and "Income Growth" portfolios report on their performances after the UK's decision to leave the European Union (EU).

Mick Gilligan, Killik & Co, Growth Portfolio

I estimate that the Growth Portfolio is probably down 1.5-2% since Thursday night's close. The hardest hit have been the UK mid-cap-focused portfolios, Axa Framlington UK Select Opps and Majedie UK Income, which are likely to be down 6-8%.

However, I estimate that the non-UK equity exposure is up 3-7% once we adjust for foreign exchange movements.

The best performer on the day is likely to be Odey Swan (my very rough estimate is +7%) - long gold and net short of equities.

Our Money Observer portfolio is positioned for most eventualities and I see little reason to make any changes right now. In a modest number of "real money portfolios" we selectively added to UK mid and small-cap equity exposure on Friday.

The Money Observer portfolio has circa 40% in UK equity funds and that feels enough to me, so no inclination to change.

To view the growth portfolio's holdings and trading chronology, click here.

David Stephenson, Thames Valley Investments, Income Growth Portfolio

The Brexit decision has had a mixed effect on the Income Growth Portfolio. Diversification reduces risk, but also increases the chances that one or two investments will underperform.

In general, after an initial sell-down, markets have recovered, in fact so much so that when I last looked the FTSE 100 was up for the week. The big winners appear to be UK companies with US dollar earnings or overseas investments priced in US dollars.

In the portfolio Evenlode Income should do well, as it has lots of dollar earners. Artemis Global Income has a third of its assets in the US and Middlefield Canadian is all North America.

Fidelity Enhanced Income also has a lot of dollar-earning stocks, but also has exposure to financials such as L&G and HSBC, which have sold off quite significantly

The same goes for JOHCM UK Equity Income. Invesco Perpetual Global Financial Capital will also have suffered, although as the majority of the fund is fixed interest losses should be pared.

European stock Schroder European Alpha Income and Princess Private Equity are also down on concerns that the Brexit may just be the start of problems for the EU.

However they should not be so badly affected as they are light of financials. Blackrock World Mining is little affected by a Brexit, but as commodities are priced in dollars has risen slightly.

Domestic stock may underperform in the short term as the UK looks for a new prime minister and the consequences of the Brexit lead to uncertainty.

This may hurt Marlborough Multi Cap Income; there may be less demand for real estate, although as there has been strong demand I do not expect a major sell-off.

Furthermore it is quite possible that discounts on investment trusts may widen whilst we go through a period of uncertainty.

I am not planning any immediate changes, but will look for opportunities as and when they appear.

To view the income growth portfolio's holdings and trading chronology, click here.

Roddy Kohn, Kohn Cougar, Balanced Portfolio

We are not making any changes to the portfolio. Clearly the market wasn't expecting an "out" vote and as a result there has been extreme volatility. Now isn't the time to make bold changes to the portfolio, we need the dust to settle and rational thinking to prevail.

The portfolio has been structured with the mandate in mind, i.e. "balanced", and therefore even on a day where all the indices are a sea of red, some of our holdings have made gains.

On a positive note our largest holding, the I-shares MSCI World index, closed the day up 4.15% and the Oil ETF also rallied by 4.59%. These have obviously benefited from the fall in sterling. Our holding in Personal Assets has also held up well with a small positive return.

On the flip side, the two property holdings have seen large falls, and our European and Japanese funds are both hedged and would therefore have not benefited by the fall in sterling.

To view the balanced portfolio's holdings and trading chronology, click here.

This article was originally published by our sister magazineMoney Observer here.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser