The Effect of Brexit

The question most asked by clients during annual reviews is “what effect will Brexit have on my investments?”

Stock market performance generally reflects the known knowns. In other words it knows the possible outcomes and has valued shares accordingly. It is the known unknowns that cause problems – hard, soft, delayed or no Brexit!

Once the known unknowns are resolved there is every reason to believe that shares will be valued more positively as companies will then know how to plan for the future.

The Problems At Woodford Fund Managers

Neil Woodford’s Equity Income Fund has suspended encashments and additional investments for an as yet unknown period. This follows a period of underperformance by the manager that led to many investors withdrawing their investments.

In order to allow for an orderly disposal of investments to meet redemptions, rather than being a distressed seller, the fund has been closed temporarily. This will allow assets to be sold to meet the possible “rush for the door” when the fund re-opens.

Neil Woodford was one of the most highly regarded fund managers. He established himself as a dependable manager who outperformed most others over a period of some three decades. It is difficult to believe that he has suddenly become a poor manager. Like every manager, he experiences periods of underperformance when his investment style differs from current market sentiment. Over longer periods, his investment style has outperformed many others, so it will be no surprise to see him do so in the future.

Once the fund is open for business again we will be reassessing the future of the fund to determine whether it is one to be recommended.