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Your views: how to position as cantons and SNB caught in Brexit mire

Your views: how to position as cantons and SNB caught in Brexit mire

The news that came in overnight announcing the British vote to leave the EU has shocked the markets but how are Swiss independent asset managers reacting to the historic decision?

We spoke to investment professionals to see how they are adjusting allocation and where they see opportunity pockets opening up in the market.

Marcos Camhis, founder of FOS Asset Management:

The international markets are reeling from the shock but we already see things stabilising at a better level than we saw this morning. I think the SNB will really wait to see what the plan of action will be at the European level before taking action at the Swiss level.

The outcome may cause an exit of bankers generally towards Geneva as we saw in 2008 but it really depends on how the UK environment will stabilise.

I would say we were sensibly positioned this year anyway so this vote was another reason to stay defensive.

Going forward I think there might be some opportunities because of the readjustment of value and risk that is emerging. From now until the end of the year I think there will be quite a few allocation opportunities for us.

I think we will be probably overweighting the US and Asia until the European situation stabilises.

So from a big geographical point of view I think we will allocate to non-EU markets but then opportunistically I think in the readjustment by the end of the year I would envisage our Europe allocation on the equity side to start increasing.

Short term, I would say increased allocation outside of European markets but medium term Europe will be attractive once the political situation is clearer.

Egon Vorfeld, managing partner at The Forum Finance Group S.A.:

Clearly the fact that we took our position about two weeks ago, before the market started getting rattled, to hedge our European equity risk, and having already hedged most, if not all our sterling risk - this was the right decision.

But that’s all it was, it was a recognition of an asymmetric situation where the markets were not yet pricing in what we thought was a low probability of a Brexit, but knowing that if the surprise result would come, there would be quite a strong reaction.

Markets are down everywhere, not just Europe and I think the negative effects are really underestimated.

I think there are opportunities at the moment but you have to be really sure about what you’re buying. We’re holding off unless it drops dramatically and we have a lot of cash at the moment.

We put in place a very serious damage limitation two weeks ago but we’re not yet moving back into the markets. I think if the European market drops 10%, and that’s not currently the case, then we may well take off our protection but that’s not certain yet as it is highly unexpected.

The SNB has a lot of sterling so it may well cost them quite dearly, which would mean they will not be paying dividends to the cantons. So this could be a tough year for the cantons.

This is bad news for the balance sheets and the cantons not getting the dividends they heavily rely on.

Oliver Collins, portfolio manager at Eniso Partners:

The overbought signal of Eniso Partners Risk Appetite indicator switched off at the start of the week and we therefore received a buy signal for equities.

Consequently, after having been market neutral over the course of the last 3 weeks we systematically decreased our equity hedges over the last couple of days and increased our equity allocation. 

Eniso Partners equity allocation is positioned defensively after having rotated out of the banking and cyclical sector over the course of the week, this also applies geographically which together with our equity and fixed income hedges has mitigated the drawdowns being witnessed across global financial markets today. 

From what we are seeing on markets today it is clear that the Swiss National Bank is taking a proactive approach to Brexit after having intervened in the FX market to mitigate any upward pressure on the CHF. The SNB will continue to abide by its mandate of price stability and protecting Switzerland exporters.

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