Richard Buxton, a top money manager in London, is predicting the Brexit fallout to be nothing short of “horrible” in ways that the city’s Square Mile has still not managed to fully grasp, as of yet.
Buxton is chief executive and head of UK equities at Old Mutual Global Investors (OMGI) – a fund that controls £26bn ($34.4 billion USD) of funds on behalf of individual investors and institutions.
“I don’t think there was doom-mongering, because it is absolutely going to be horrible,” he said. “Mark Carney’s speech [in which he warned of dangers of Brexit] was absolutely spot on. This is just really bad news.
“You can criticise the Brexit team for a) an utterly mendacious campaign and b) not expecting that they would really win, so never having a plan. I mean the whole thing is literally unbelievable. It is extraordinary how we have ended up where we are.”
Buxton, in his 31-year tenure, is widely regarded as London’s leading stock picker – and his warnings are rather alarming. He did note that things have been worse – and recently – in 2008 cashpoints were 30 minutes from running out of funds, which was inarguably worse that the Brexit mess.
But being marginally better than the worst economic catastrophe in recent history isn’t really much to be proud of.
“Unlike an election result, where ‘OK, it’s not great, but in five years’ time it can be reversed’, this is stupendously final,” he said. “I don’t always agree with Martin Wolf [the Financial Times columnist], but when he wrote the day after that this is probably the single worst event in British postwar history, yeah, I don’t disagree.
“In terms of the markets, you have seen this massive polarisation, literally 60-70% share price differential within days, between British American Tobacco [which went up due to the weakness of sterling against the dollar] and a housebuilder [that went down]. That is without precedent.”
And things without precedent are not what fund managers like to see – as it brings up the threat of redemptions as citizens decide they don’t want money in funds. This is a real threat for city bond issuers. Several property funds in London have already blocked investors from removing their money in a panic – and Buxton noted that OMGI has seen “modest outflows.”
“We are OK, but clearly we have got to accept that over the next six months we will have to work with our clients. At the moment, we are even struggling to get appointments with people because they are just head down, in the bunker, don’t want to know, don’t want to talk anyone and don’t want to think about doing anything. That will fade over time, but it’s how can we get out to people and say ‘look, we do still think there are some amazing investment opportunities here’.”
“Now I think the economy is going to judder to a halt [or] have a mild recession, but I don’t think it is going to be as severe as some of these shares are pricing in,” he said. “That said, there is no mad rush to add to or buy into some of those stocks, because the real economy is only going to gradually emerge over the next three to six months.”