A survey of financial advisers taken ahead of the EU referendum by Barings found that a Brexit vote was seen as the biggest global macro-economic challenge to investment growth with a six month view, cited by almost three-quarters (73 per cent) of respondents.
The firm writes that this was followed by the forthcoming US elections (61 per cent), slowing growth in China (61 per cent), and over leveraged economies’ ability to reduce debt (39 per cent).
Now latest findings from Barings’ IFA Barometer, reveals that just over a half (51 per cent) of IFAs say they are encouraging clients to consider greater diversification of assets, while a quarter (27 per cent) say they are specifically encouraging investment in multi asset products to combat current market volatility. Overall, half of respondents (48 per cent) are net favourable towards multi asset growth products.
In addition, one in eight (13 per cent) respondents expects clients to increase exposure to multi asset funds by more than 20 per cent over the next 12 months. A further one in five (19 per cent) say between 10-19 per cent. Just 5 per cent expect to decrease exposure, the firm says.
Marino Valensise, Head of Multi asset & Income at Barings, says: “Before the referendum, a vote for Brexit was perceived by UK IFAs as the biggest threat, and we are now in that volatile landscape. IFAs and their clients are asking what they can do to mitigate risks. With the Brexit vote now cast, the feared uncertainty and volatility has certainly played out, as much on the political stage as in markets, and looks set to continue as the Brexit decoupling gets underway.”
A third of respondents (30 per cent) said they thought clients should increase exposure to multi asset growth funds. Multi asset income funds were second at 29 per cent; developed markets equities also came in second at 29 per cent. One in 10 (9 per cent) IFAs said they are ‘very’ favourable towards multi asset growth products and a similar number (10 per cent) say they were ‘very’ favourable towards multi asset income products.
The research found that 17 per cent of advisers think it is likely there will be a major global stock market correction over the next 12 months. The majority (83 per cent) anticipates that, over the next three years, the UK economy will predominantly experience on-target inflation (inflation between 0 per cent-2 per cent, in line with Bank of England targets). Respondents put a prolonged low interest rate environment as the factor that clients are most worried about, ahead of equity market volatility.
Valensise says: “Given the market uncertainty, it is good to see a high percentage of IFAs who are recommending clients increase exposure to multi asset products, which can limit downside risks while making the most of growth opportunities. Barings has been at the forefront of multi asset investing and innovation, creating solutions for a whole range of client needs and market conditions, something which is more important now than ever.”