While Brexit has continued to hit the UK property market, several underlying trends are starting to paint a different picture, particularly in the central London office market where its expanding skyline is proving more resilient than expected. Research conducted by the Financial Times earlier this year, for instance, showed that London’s top 15 banks have collectively cut fewer than 3,500 jobs in the UK capital since the Referendum. The FT’s report said this is only 5% of the 15 banks’ City headcounts and that fewer than 1,500 of those moves were linked to Brexit.
When constructing a fund for investors, the first question a fund manager ought to ask is: “How will I account for redemptions from this fund?” As Jack Reacher, from the famous book series, would say: “Monitor your surroundings and always have an exit.” Such advice is most relevant when the fund is named after the strategy, which is why we make liquidity the most important step in our investment process.
It is uncertain when the current economic cycle will come to a halt, but what is certain is that we are undeniably approaching full time. This has put pressure on investors, who are shying away from ‘traditional’ fixed income assets – such as investment grade corporate bonds – in favour of alternative-style absolute return bond funds and more strategic, esoteric offerings.
We all know how events have a way of creeping up on us: birthdays, Christmas, Money Market Reform (earlier this year) and now the end of the London Interbank Offered Rate (LIBOR). While the infamous reference rate doesn’t officially become extinct until the 1st of January 2022, we need to look at what liquidity or pricing issues might occur during this immense transition away from it to alternative risk-free rates.