Brexit: the view from Greece
Years from now, the result of the EU referendum will be another one of those historical moments in which everyone remembers exactly where they were when it happened. I certainly won’t forget nor the hours that followed as I was in a hotel built into the cliffs on a Greek island.
Effectively my room was a cave and at 4am (2am BST) I woke up to check the BBC News website for an update. However, as I was in a cave, my Vodafone signal was as volatile as the markets were to become later that day. After moving around the room, I picked up enough bars to get the Sunderland result. I knew then I wouldn’t be getting much sleep that night. By 6am local time I checked again (standing on one leg next to the door) and by now the die was cast.
I rang my assistant fund manager Will McIntosh-Whyte at 9am local time. He was already in the office and was equally stunned by the result. At this stage, Asian markets were indicating how the day would pan out. We reconfirmed our plans, which we put in place some time ago having positioned the funds for a Brexit. We didn’t actually expect it to happen, but given the closeness of the polls (and the risk that the overly-consensual view of following the bookies may be wrong this time) we felt it was the most prudent course of action to protect our investors’ money. We discussed hedging our significant foreign currency positions if sterling continued to collapse. We also decided to look for pricing anomalies caused by illiquidity in corporate bond markets. Finally, we looked to buy overseas earners in the FTSE 100 if they were down significantly.
As it happened the markets were more resilient than we expected and we only added marginally to a few equity positions. We therefore maintained high cash positions in case the potential political fall out over the weekend spooked markets further.
These types of situations where there is so much uncertainty are always the most challenging. Do you make a big bet to make super normal returns or do you focus on protecting what you have? In our case, it’s the latter, but we are trying to take advantage of any anomalies the volatility creates. These markets could well be irrational for weeks to come and to believe you can master them would be a big mistake.
My flight home on Saturday (British Airways) was cancelled with no explanation. With just one flight a day, it meant another night in the cave – order the gun and beans?
The hotel receptionist suggested this was a sign of things to come due to Brexit. “Let’s not panic just yet,” I replied. The room charge for the extra night was very expensive, so BA should get ready for a claim, but I’ll ask for it in euros!
Look out for my next blog which will cover what could be next…