Brexit Fallout: Investors urged not to panic, consider money markets as diversifier

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27 June 2016 | Nedgroup Investments

• We are entering uncertain times, volatility is expected
• Diversification is key and cash will be a safer place to be
• Investors urged not to make rash decisions

Uncertainty in markets is rife following the decision by British voters to leave the European Union yesterday. Investors are urged not to make rash decisions at this time, but to ensure that they are sufficiently diversified ahead of likely volatility.

This is according to Ray Wallace, CIO of Taquanta Asset Managers and fund manager of the Nedgroup Investments money market funds, who says there is no need for investors to panic, particularly those who have sufficient, well diversified cash allocations.

“We are entering unchartered waters and there is a lot of uncertainty at the moment. What we do know for sure is that we can expect further volatility in the near future. In this sense, we urge investors to remain calm and to carefully assess their portfolios to ensure that they have protective measures in place,” he says.

Wallace points to cash as a safe-haven diversifier for investors. “Given the volatility we can already see, we believe cash is going to be a good place for investors, particularly large corporates, to park funds while they sit it out. By investing in an expertly managed money market fund, investors can enjoy attractive, above-inflation returns and the benefits of daily liquidity, without being affected by market volatility,” he explains.

Wallace cautions that this does not mean investors should switch all of their investments into cash, but that appropriate diversification into highly rated cash funds is a prudent place to diversify investments at the moment.

According to Wallace, the Nedgroup Investments money market funds have been conservatively positioned recently, in expectation of possible implications of Brexit. “We believe liquidity is a key objective and going forward we will continue to manage the funds for yield and liquidity with a focus on maintaining our high quality credit,” he says.