Robo-advice manager spots Brexit bias on UK equities

Brexit-voting fund managers are more likely to be positive on the outlook for the UK economy, according to Nutmeg investment manager James McManus.

Robo-advice manager spots Brexit bias on UK equities

While McManus did not state which way he voted in the referendum, he is currently reserving judgement on the British economy until after key Brexit negotiations in June.

“It’s easy to see in the press which managers have quite a positive pro-Brexit view,” he said. “There are other people who are more cautious not necessarily because they are anti-Brexit but because they are assessing the full balance of what could go on.”

Renowned UK equities manager Neil Woodford is one of the more notable bulls when it comes to the outlook for the domestic economy, although he has not publicly divulged which way he voted in the Brexit referendum. Portfolio Adviser reached out to Woodford Investment Management but the firm declined to comment.

However, Crispin Odey, who has been bearish on the UK economy since Brexit, was one of the Leave campaign’s largest donors.

McManus said it was important for investment managers not to let personal political views impact how they manage their clients’ money.

Brexit-voting regions were more likely to favour UK equities over eurozone equities, while the opposite was true for Remain-voting regions, according to an investor sentiment survey from Lloyds Private Bank, published in March.

Irish border

Though McManus said there is no denying that certain UK stocks look very attractive from a valuations perspective, he stressed that he does not believe the level of risk justifies the reward.

Nutmeg currently has a slight underweight to the FTSE 100 large caps and is neutral on the more domestically-focused FTSE 250.

“We are in the business of wealth management, managing people’s retirement, their savings, growing that wealth conservatively and protecting that wealth,” he said.

It is up to the likes of hedge fund managers to take more risky bets on the UK, he said.

McManus is waiting for key decisions around the Irish border to hammered out before making judgement on the prospects for the UK economy.

“June is the big month for Brexit negotiations. There are certain hurdles that need to be met by June and from there we’ll have a better picture as to whether the outlook is rosy or less rosy.”

Sterling overweight

Longer-term he said Nutmeg views sterling as attractive.

“We are going to stay very flexible but at the moment we think overweight sterling is good and that there are better opportunities than the UK.”

Though McManus admitted “there clearly is a sterling factor” at play in the FTSE 100, he doesn’t believe this is a long-term observable factor.

Nutmeg is also overweight US large caps and is among a growing number of discretionary managers using ETFs to gain granular exposure to particular sectors. The robo adviser is using sector ETFs to tilt the portfolio toward internet retailers, tech and financials listed in the US.

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