Earlier today, it was confirmed that the people of the United Kingdom (UK) have voted to leave the European Union (EU); Aberdeen Asset Management has issued a statement “We operate in a number of countries across Europe through locally regulated subsidiaries. Our principal cross-border fund range for European investors located outside the UK is domiciled in Luxembourg. We do not expect either our non-UK or UK businesses to be affected in a substantive way by the result of the referendum although clearly there may be regulatory changes in the longer term. However, we operate currently in over 25 countries around the world and are experienced at adjusting our business to service our clients’ needs in a wide range of regulatory environments. We are confident that we will be able to meet the challenge which this result presents.”
David Cameron has announced he will resign as UK Prime Minister and made clear that Article 50, the formal mechanism by which a Member State may leave the EU, will not be triggered until his successor is in post in at least three months’ time. After Article 50 is triggered, there will be a period (expected to be at least two years) during which the constitutional and legislative arrangements will be negotiated and the effective date of the UK’s exit from the EU will be agreed. Between now and the agreed exit date, the current position in relation to regulation and investor protection will remain largely unchanged.
Aberdeen Asset Management co-founder and Chief Executive Martin Gilbert commented “Whilst some of the market falls are steep, from my long experience having worked through Black Monday, Black Wednesday, the Asian crisis, etc this is not the time for knee jerk reactions but rather it’s important to have a calm head on behalf of our clients. As long-term investors, often the best course of action is to do nothing or even take advantage of mis-pricing opportunities.”
Aberdeen Asset Management Head of Emerging Market Debt Brett Diment commented “There is going to be a lot of volatility in financial markets and there’s already been a strong reaction in emerging market currencies. But this is a much bigger deal for the UK than it is for emerging markets. Most emerging markets are far more driven by the dynamics of their own economies and politics than they are by ours. The external factors that really matter for these countries are the price of commodities, China’s economic slowdown and what Janet Yellen does next. The only exception is if the UK leaving the EU causing a big slowdown in global growth. That would effect emerging markets but it’s unlikely to happen.”
Aberdeen Asset Management Head of European High Yield Steve Logan commented “It’s risk off as investors seek the safe haven of cash and government bonds. We need some clarity on the next steps. Ironically this sell-off is welcome as long as it doesn’t turn into a market rout. Euro HY had performed well and bonds were beginning to look expensive. This sell off could prove an extremely attractive entry point. ECB corporate bond purchases as well as the ongoing structural shortage of income producing assets should ensure that demand for European High Yield persists. Whilst it is a little early to identify the potential negative impacts on specific companies, I sense that this is more of a technical sell-off rather than one based on fundamental credit deterioration.”
Aberdeen Asset Management Head of Hedge Funds Russell Barlow commented “Hedge funds had been reducing risk in the lead up to the referendum but the majority were positioned in the expectation of a remain vote. Volatility managers will be among the few strategies that we expect to be in the black today.”