PARTNER INSIGHT: Royal London Asset Management (RLAM) UK equity managers Richard Marwood, Henry Lowson and Martin Cholwill believe Brexit-related volatility will be an opportunity for the investment team rather than a concern.
Talking to Investment Week editorial director Lawrence Gosling as part of a new series of video interviews, Marwood said it was a "difficult and dangerous" move to second guess Brexit.
Marwood, manager of the Royal London UK Growth fund, said: "We are not trying to predict the impact of Brexit and it has not changed our investment process. In the past, we have found trying to call big macro events is so difficult and dangerous so we do not do that.
"We try to choose individual companies that will be OK regardless of the outcome."
However, the manager trio agreed that volatility created by Brexit could have a positive effect as it presents market mispricing opportunities.
RLAM UK Equity Income fund manager Cholwill said: "When there is increased uncertainty, there is market volatility which is a fund manager's friend. It throws up opportunities to take advantage of market pricing. You just have to be sure you know the company well and have conviction."
Meanwhile, looking at the possible impact of a UK interest rate rise, which could happen as early as November, the managers said Bank of England Governor Mark Carney would want to take a proactive approach.
Carney has come under pressure to raise rates in the face of rising inflation, which currently stands at 3% on a CPI measure.
Marwood said: "We will look at a company's ability to fund themselves in the event credit gets harder to obtain. We look for businesses which have strong balance sheets, are not absolutely reliant on debt markets and generate a lot of cash.
"But there are a lot of companies with customers who are reliant on debt finance, such as consumer companies, and people could be squeezed if rates go up. So we are being wary."
However, Henry Lowson, manager of the RLAM UK Smaller Companies fund, noted smaller companies tended to be largely unaffected by monetary policy moves.
"The companies negatively affected by a rate rise tend to be higher up the market-cap scale, such as the consumer staples, tobacco and the bond proxies. They are less prevalent in the small-cap space."
However, Lowson said he had been reducing his exposure to consumer companies which were facing risks, while increasing his exposure to industrials, healthcare and technology companies.
Industry Voice: The sell-off in emerging markets this year has created a more favourable environment for Asian income funds, allowing them to deliver strong returns relative to the index and display their ability to mitigate risks to investors' capital....
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