The Brexit Saga: where to invest over the next few months

It seems extraordinary, but each week the noise on Brexit ratchets to a new level in what is clearly a political, but not an economic crisis. As investors, it is important to discern between the noise and the actions of consumers and companies, in order to better judge where to deploy capital safely. There isn’t a politician or commentator who can be sure of what the final outcome of Brexit will be, or even when it will be, and yet investors need to keep deploying capital in an environment of low inflation and negative interest rates (if not nominal then real). 

Will we leave on the 31st October as the Prime Minister has promised? Will an extension be sought to take us into early 2020 before we leave the union? By which point, Jeremy Corbyn's Labour party could be in power. 

How do investors navigate this mind field in the meantime and remain protected from the political noise and fall out. Here I explain ways for investors to Brexit proof their investments over the coming weeks. 

Stay Calm and Carry On – Don’t stop investing – money left in bank accounts or government bonds is declining in value day after day as inflation sits at around 2%. Therefore, doing nothing equals getting poorer. However, given the late stage of the cycle, the political instability, and the warning lights of a negative yield curve, now is a time for caution. So, be selective and ask does this investment look good on a 4-year basis.

Play safe and longer term – All investors should keep some powder dry for potential great bargains If the market panics with a disorderly Brexit. There is probably a 25-30% chance of that happening, and in the short run, prices could easily fall 20% for a short window. For capital deployed now, focus on safe income deals and companies that are fixing major macro issues/opportunities. We like multi-family assets in the US that we are acquiring at an adjusted yield on costs of c7% in a low interest rate environment. 

Make currency work for you - Take stock of the currency markets. The pound has seen some significant swings since June 2016, falling 20% plus since the referendum. Now is the time to make sure you take a balanced view. You're a bit late if you're long on Sterling and haven't looked to the dollar and the euro, but for insurance buying, income yielding assets in these markets gives you premium on your investment and insurance in the event of further sterling falls. For European and US investors, the ￡GBP is “on deal”. Finding good long term investments will likely yield the double whammy of a good underlying return and positive currency swing. Now's the time to adjust the balance, whilst being mindful that sterling will be volatile, but on a long term basis it will bounce back. 

Diversify your portfolio – It pays to diversify your portfolio across different types of assets for short and long-term returns, so you can better weather any fluctuations in the market. If your assets and investments are all UK and European based, look to diversify into other global markets. 

As the CEO of an investment firm, with a focus on private equity real estate and venture investing, investors should look at the following investment opportunities to help balance their portfolio and deliver excellent returns: 

• Multifamily units in the US
• Selective retail in the UK, such as supermarkets 
• Long term housing in the UK, such as Build to Rent and student accommodation
• Diversified business parks 

Don’t let Brexit derail your investment plans. If you require more advice on how to weather the Brexit storm, get in touch and I’d be happy to discuss further.