Fund managers have started to react to the news that the UK has voted in favour of leaving the European Union, warning that the market will go through a period of heightened volatility but attempting to reassure that long-term opportunities persist.
The final result of the UK’s in/out referendum on its EU membership was 51.9 per cent (or 17,410,742 votes) in favour of Leave against 48.1 per cent (or 16,141,241 votes) for Remain.
The news has already seen David Cameron announce his resignation as prime minister and eyes look forward to how the UK will negotiate its exit from the EU – and who will lead these discussions. The market, however, has taken the news badly with the FTSE 100 tanking upon opening and sterling plunging to its lowest level since 1985.
In the following article, we round up what fund managers are saying about the historic result. We’ll be adding to this vox pop as the day progressing to keep you updated with the latest breaking views.
Neil Woodford: “It is not as negative a development as the market’s initial reaction appears to imply”
CF Woodford Equity Income manager Neil Woodford notes that the markets are “clearly shocked” by the vote to Leave but he believes the event is not as negative as it would first appear from this reaction. 
“That is not to say there won’t be challenges in the near-term. There will. We now face a period of uncertainty as the exact terms of Britain’s exit from Europe are negotiated. Financial markets loathe uncertainty as amply demonstrated by this morning’s reaction across all asset classes,” he said.
“In the longer term, it is my view that the trajectory of the UK economy, and more importantly the world economy, will not be influenced significantly by today’s outcome. Consequently, the portfolio strategy will not change. It was designed for a challenging world, characterised by low growth, deflation, debt problems, weak productivity and troubling demographics.”
“Although market conditions such as these can be unsettling, we would strongly urge investors to look through this period of uncertainty and focus on the long-term opportunity which, in our view, continues to remain attractive.”
Richard Buxton: “The world’s first DIY recession”
Old Mutual Global Investors chief executive and head of UK equities Richard Buxton said he knew the result would be close but believed that the vote would be in favour of the status quo.
“The biggest sadness of today is that it is reasonable to assume that the UK will quickly enter a period of economic recession, the key reason why we believed the outcome would be different from what has materialised today. It is, in effect, likely to be the first ever ‘DIY recession’, as George Osborne prophetically called it,” he said.
“Within equity markets, as ever at times of market stress, emotional reactions will mean that price falls will overshoot; this is the very nature of stock markets. The gold price was one of a very small number of bright spots as the result became clear; it immediately broke convincingly through the $1,300/oz barrier, as investors looked for safe havens.”
“It is hard not to feel disappointed at this result, which we know is likely to result in a difficult period for UK equity investors. As ever, we will do everything in our power to help our clients to navigate these market conditions; any investment decisions we take will be made with careful consideration.”
Mark Barnett: “Brexit has cast us into uncharted waters”
Invesco Perpetual head of UK equities Mark Barnett concedes that that the UK faces serious short-term headwinds but argues that the UK can cope with life outside the EU.
“In simple terms, the UK’s vote in favour of Brexit has cast us into uncharted waters with a level of uncertainty we have not experienced for a long time. In the coming weeks and months, there may be delays to consumer spending, companies’ recruitment and foreign direct investment as the nation and wider global economy digests the decision. In combination, these factors present substantial short-term headwinds to the UK economy,” the FE Alpha Manager said.
“Ultimately, we don’t manage money on a three-month view or a six-month view but in the best long-term interests of our clients. We will be waiting to see some of the dust settle before we move portfolios one way or the other because at this stage it is difficult to accurately assess what some of the moving parts will look like as international trade and regulatory negotiations take shape.”
“We would urge investors to recognise that we will endeavour to make considered judgments on the basis of the facts as they emerge. We will not be making changes to the methodology we have used for many, many years to build our portfolios, nor departing from the processes we deploy to analyse, understand and respond to investment opportunities across UK equity markets.”
Neuberger Berman: This is not a second Lehman
Neuberger Berman’s equities chief investment officer (CIO) Joe Amato, multi-asset CIO Erik Knutzen and fixed income CIO Brad Tank caution investors against overreacting to the news.
“No doubt this will be the first of many volatile trading sessions, and the major central banks are standing by to intervene if necessary. But we caution against reacting as though this were a second ‘Lehman moment’, as some commentators have suggested,” they said.
“Most importantly, this vote will probably exert only a marginal effect on global economic fundamentals, which remain stable but weak. We still live in a slow-growth, low-inflation, low-interest rate environment, characterised by sluggish productivity and investment. ‘Brexit’ has been a tail risk stalking markets in the same way that the oil price, the strong dollar and concerns about China created volatility back in January and February, but we think its implications are overstated.”
“For that reason, we again counsel investors to look through the noise and adjust portfolio risk to long-term fundamentals. That may mean taking opportunities to add to some positions in riskier assets once the worst of the initial volatility has passed.”
Adrian Lowcock: “The UK stock market is likely to have a Brexit discount for some time”
AXA Wealth head of investing Adrian Lowcock agrees that there is “no doubt” the UK stock market will be rocked by the results of the referendum for the foreseeable future.
“In the days before the referendum the UK markets and sterling had rallied strongly as everything indicated that the UK would remain in the European Union. Sterling rallied to its highest level in 2016 on the day of the referendum as the Brexit discount disappeared. The UK stock market had also railed strongly in the days before the vote. As such the news this morning is likely to have bigger impact on markets as it comes against expectations,” he said.
“There is no doubt a leave result is going to provide more uncertainty and therefore volatility in markets in the coming days and weeks. The impact of a Leave vote will weigh on the UK much longer than a Remain vote ever would. The UK stock market is likely to have a Brexit discount for some time, as our politicians negotiate with the European Union.”
Arif Husain: “The vote to leave could result in a global recession”
T. Rowe Price head of international fixed income Arif Husain warns that the negative consequences to the global economy could be significant.
“Those who believe Brexit is a UK problem are misunderstanding the impact it will have globally. They’re forgetting the impact that Greece had – and Greece is much smaller than the UK, and not a financial centre,” he said.
“The vote to leave could result in a global recession. It’s likely that the chances of a global recession have risen above 50 per cent. For investors, the money was to be made in the run-up to the referendum from all the volatility that was occurring. It will be harder to make money now.”
Andrew Wilson: “There is little short-term good that can come from all this”
Towry head of investment Andrew Wilson says investors have to do their best not to panic, despite the short-term turbulence.
“For investors there is little short-term good that can come from all this, as the Brexit vote is going to cause excess volatility and increased risk premia. What we will now see is the massive unwinding of positions and hedges that were placed around this event, although these will no doubt be built up again around the forthcoming US elections. Increased volatility also means an increased chance for active portfolio managers to prove their worth by making good decisions that materially benefit the investments of their clients,” he said.
“As ever, history would suggest that investors should try not to panic, and instead stick to their long-term plans. If they also have diversified and regularly rebalanced portfolios, then it would be highly unusual to experience inferior performance, over time, and, on the contrary, good decisions even in the most volatile of markets can materially improve the outcome.”
Chris White: “It is likely that defensive stocks and multinationals will come to the fore”
Premier Asset Management head of UK equities Chris White says the result will probably leave “markets under a cloud” but some sectors are likely to fare better than others.
“Part of the UK’s success over the past 40 years has been in terms of attracting foreign investment to our shores. Foreign investors have come here for many reasons, but one of the major reasons is that we are, and are seen to be, a gateway to Europe,” he said.
“For example, it is foreign investment that has built up our banking, financial services and automotive industries and it remains to be seen how these businesses react over the medium to longer term. It is likely that defensive stocks and multinationals will come to the fore, whilst financials and both consumer and industrial cyclicals will come under pressure.”
PwC: “A key immediate concern will be the management of market volatility”
Mark Pugh, UK asset management leader at PwC, said the Leave votes brings two main issues for asset management houses to deal with: market volatility and the prospect of fund outflows.
“A key immediate concern for asset managers will be the management of market volatility - the natural companion of political and economic uncertainty. For asset managers, the concern is particularly pressing as it impacts the value of the very product itself. Some listed UK asset managers will be worried about the combined impact of volatility on their own share price alongside the impact on the value of the assets in their funds,” he said.
“Hand in hand with this will be liquidity concerns for funds, especially if there is a run of outflows over a long period of time with no market correction. Regulators have been focused on liquidity risk for some time and the asset management industry should already have stress tested for this outcome but those who prove unequal to the task can expect scrutiny.”
Whitechurch: “It is just one of a number of issues that will drive global markets”
Gavin Haynes and Ben Willis at Whitechurch stress that investors should not think Brexit will be the sole driver of financial markets from here.
“Prior to the referendum we were keen to stress that if there is a Brexit, this would not be the key driver for global markets going forward over the longer term. Whilst this does not feel to be the case today, we are convinced it is just one of a number of issues that will drive global markets,” they said.
“Equally important is looking at the bigger picture facing global markets. Factors such as commodity prices, US interest rate policy, the growth of the Chinese economy, global debt levels and inflationary versus deflationary forces remain equally important in our view.” “Brexit is no different to all of these factors in that whilst it does provide concerns, as contrarian investors it is at times when we see entrenched pessimism becoming priced into assets that we see opportunities arise.”
