Investment into UK dips as Brexit vote looms
Institutional ownership across Nasdaq’s UK client base is lower now compared with the levels seen in May 2015, according to research from Nasdaq Corporate Solutions, ‘indicating that the institutional appetite for UK-listed companies has dropped’.
The study, which looks at the institutional ownership of Nasdaq Corporate Solutions’ clients in the FTSE 100, FTSE 250 and ‘an array of smaller caps’ highlights a geographical gap.
Investors in Europe – including the UK – appear to be most wary of the consequences of Brexit, according to the research, having reduced their exposure to the UK since May 2015 when Prime Minister David Cameron was re-elected with the promise of a referendum making up a key part of his campaign.
‘In terms of geographical changes, an interesting trend Nasdaq Corporate Solutions has observed across its UK sample since May 2015 is that UK investors are the largest sellers,’ state the researchers. ‘The selling of UK institutional investors in their domestic markets has seen their holdings decrease by a net 3.5 percent, while across the channel continental European institutions also appear wary of the consequences of a Brexit, notably reducing their exposure to Nasdaq’s smaller-cap sample by more than 7 percent.’
At the same time, however, US investors have increased their exposure, up 6 percent across all market caps. In fact, eight of the 10 largest institutional buyers of UK equities over the past year come from the US. (see Top buyers and sellers of UK companies, May 2015-May 2016, below)
Nasdaq notes that while the overall reduction in exposure to the UK has been moderate, certain sectors – those most exposed to the UK’s domestic economy and sterling, including financials, consumer cyclicals and industrials – have been hardest hit.
Alex Free, analyst and co-author of the report, says one of the key takeaways for IROs should be to increase their communication with shareholders ‘leading up to this historic vote, to fully understand and assuage their fears, and highlight their contingency plans in the case of an out vote. This is a key undertaking, especially in light of recent heightened levels of volatility, which can be expected to increase yet further as the vote approaches.’
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Top buyers of UK companies, May 2015-May 2016:
|1. Harris Associates||Core value||Chicago, US|
|2. Franklin Advisers||Core value||San Mateo, US|
|3. Templeton Investment Counsel||Core value||Florida, US|
|4. Wellington Management Company||Core value||Boston, US|
|5. INVESCO Asset Management||Core value||London, UK|
|6. Franklin Mutual Advisers||Deep value||Short Hills, US|
|7. Henderson Global Investors||Core growth||London, UK|
|8. Artisan Partners||Core growth||Milwaukee, US|
|9. T Rowe Price Associates||Garp||Baltimore, US|
|10. Cambiar Investors||Core value||Denver, US|
Top sellers of UK companies, May 2015-May 2016:
|1. UBS Global Asset Management||Core value||London, UK|
|2. Aviva Investors Global Services||Core growth||London, UK|
|3. APG Asset Management||Core growth||Herleen, Netherlands|
|4. BlackRock Investment Management||Core growth||London, UK|
|5. Saudi Arabian Monetary Agency||N/A||Riyadh, Saudi Arabia|
|6. USS Investment Management||Garp||London, UK|
|7. Morgan Stanley Investment||Core value||London, UK|
|8. Credit Suisse||Garp||Zurich, Switzerland|
|9. M&G Investments||Deep value||London, UK|
|10. Dodge & Cox||Deep value||San Francisco, US|
Source: Nasdaq Corporate Solutions UK client base