The Investor 90 Asia

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THE INVESTOR CENTRE
W hile markets remain concerned
by global headwinds such as
China’s ongoing attempt to rebalance
its economy, global debt levels and the
ability of central banks to stimulate
growth,the last quarterwas dominated
by the UK referendum. Few analysts
or investors anticipated the result.
Equity markets fell sharply, along with
sterling – the latter to its lowest level
against the dollar since 1985,while it
was also down against the euro.
The fallout from the Brexit vote
will lead to ongoing volatility,with
weak equity markets and weak
sterling assets. Investors will be
seeking clarity around changes to the
UK’s relationship with the EU and the
EU’s response to the UK referendum.
The likelihood of ‘copycat’ referenda
has risen,which will weigh on the
currency and peripheral European
banks and companies.
In the run-up to the referendum,we
were defensively positioned across our
fund range, and are underweight in
European nancials,which is where
we expect pressure to be felt the most.
The ongoing volatility will o er us
buying opportunities.
COLUMBIA
THREADNEEDLE
Strategic Managed
Portfolio is defensively positioned and
ready to spot opportunities to invest
Fallout fromBrexit
likely to lead to
ongoing volatility
Richard Colwell, Stephen Thornber
and Jim Cielinski
Our returns year-to-date (to
market close on 24 June, the day
after the Brexit referendum) are up
almost 8% in sterling (or at in US
dollars) terms,while the market was
up only about 1% (or down more than
6% in US dollars).
We do not invest based upon
predictions of macroeconomic or
political outcomes and we do not
know the consequences of Brexit, just
as we did not for the euro crisis in
2011.Therefore,we ensure that the
pro ts of existing and potential
portfolio companies are not overly
sensitive to these developments.
Our portfolio companies are not
overly dependent upon any one region
or country of the world, as more than
half of their revenues come from
outside Europe,and only 5%-10%from
the UK.Our portfolio companies also
have resilient business models with
pro ts that did not decline on a
scal-year basis through the global
nancial crisis.The revenues of our
UK-listed holdings – BritishAmerican
Tobacco, ImperialTobacco,Unilever,
Micro Focus International,SageGroup,
and UBM– are international,with less
than 10%, on average, from the UK.
BURGUNDY
Joint manager: Greater European
and Greater European Progressive
Portfolio companies are not overly
dependent on UK revenues
Investments are not
basedonpredictions
of political outcomes
Kenneth A. Broekaert
Our returns in sterling (to market
close on 24 June) are up almost
12%calendar year-to-date,ahead of the
worldequitymarkets by approximately
5%. Returns to UK investors, from
companies with signi cant business
exposure to major currencies other
than the pound, have been signi cantly
enhanced by the strength of those
currencies against a very weak sterling.
Among our 21 holdings, two posted
declines (Apple -6%,Novartis -1%)
and three underperformed the world
equitymarkets (HannoverRe+1%,
Canon +2%, BB&T+6%).
The companies Burgundy owns across
theUS,Europe andAsia have strong
market positions and strong economics
within their industries, regionally and
often globally.Most of our portfolio
companies have business models that
are quite resilient during di cult
periods.Our holdings also represent
good value,with an average price-
earnings ratio of approximately 16x and
a dividend yield in themid-2
the time of writing there have been no
changes to the portfolio. But post-
Brexit,we are monitoring our Dream
Team list for opportunities to upgrade
quality and value within the portfolio.
BURGUNDY
Joint manager: Worldwide Managed
and Worldwide Opportunities
Portfolio companies are resilient
during volatile market periods
Enhanced returns
fromcompanies not
exposed to the pound
Kenneth A. Broekaert
THE INVESTOR | 33