Further afield
It is not just UK funds that will be affected by a Brexit. According to PureGroup, a vote in favour of Leave is likely to increase European default spreads, European dividend yields and European volatility.
Looking at funds within both European ex. UK and European strategies that are favourably positioned for higher default spreads, the firm said approximately 50% of funds will likely see a heightened market risks as measured by default spreads as a tailwind, while 10% of funds will likely see a more significant negative impact to their performance based on their sensitivity to increased market risks.
And, finally, higher volatility is likely to lead to a positive impact on 39.7% of the funds.
“Notable funds who would expect to have a positive contribution to their performance during periods where Default Spreads expand are Threadneedle Pan European Focus, Nordea1 European Opportunities Fund, and M&G Pan European Fund,” the firm said.
Adding: “This scenario is highly likely even if the status quo prevails, as there are other risks ahead of the Eurozone that could lead to an expansion in spreads. Wider spreads may contribute negatively to the performance of 10% of funds, as these have negative sensitivities towards this factor. The remaining 40% of funds have a neutral stance so are unlikely to be affected by changes in default spreads.”
