UAE-based investors who have UK assets in their portfolio - of which there are many - should now consider "Brexit-proofing" their investments ahead of next month's referendum.
As we move ever closer to the historic vote, and in the case of a "Leave" campaign triumph, investors in the UAE should be looking closely at how they can mitigate the effects of a fall in value of UK assets.
In the run-up to the referendum, we have already been witnessing the uncertainty that has been generated by the high level of campaigning. A large number of organisations within the private sector have been postponing or avoiding investment altogether, in anticipation of the vote.
As such, if Britain leaves the EU, this volatility and unpredictability can be expected to continue. It is almost certain that the sterling, UK equities and government bonds will face additional pressure.
Banks' contingency plans
Indeed, British banks and the Bank of England are busy preparing contingency plans should Britain leave the EU after the June 23 vote.
Recently, the European Central Bank requested large eurozone banks to specify their plans as to how they're preparing for a possible Brexit, and how they would manage the impact on the markets and any necessary modifications to their business models.
The ECB is currently examining the specific exposure these banks have to Britain, and the contingency measures they have in place.
According to an ECB spokesperson, "ECB Banking Supervision is engaging with the relevant banks to ensure they are adequately assessing the risks and are prepared for all possible outcomes."
Take action
There are a number of things UAE-based investors can do to prepare for the potentially substantial effects Brexit will have on UK assets.
Predominantly, by increasing exposure to overseas investments.
Ahead of the referendum, this is an opportune moment to re-evaluate investment portfolios, leaning more towards international stocks, bonds and possibly property.
That said, rebalancing portfolios is a savvy move for investors, irrespective of Brexit.
Investors who favour a varied portfolio are in a far superior position to be able to mitigate risk during times of market turbulence, and at the same time, make the most of the inevitable opportunities that present themselves.
Failure to diversify a portfolio is widely regarded as one of the most common investment pitfalls.
Spreading money around is a vital tool to manage risk. A well-balanced portfolio is achieved by diversifying by geographical region, asset class and industrial sector.
It is absolutely untrue that investing globally is riskier. On the contrary, the more diversified the portfolio, the greater the reduction of overall risk.
Furthermore, it is a fallacy that international investing is solely for the more sophisticated investors. There are numerous well-managed retail funds available, offering global stock market exposure, using many different approaches.
Importance of financial advice
Individuals are becoming more aware than ever of the tangible benefits of independent financial advice in growing, maximising and safeguarding their wealth.
Indeed, expatriates often require specialist financial advice. Typically, because of their more transient lifestyles and unique tax situations, which have a significant impact on almost every area of their financial affairs.
A financial adviser will, therefore, assist investors in acquiring more opportunities, investment options, and various risk tolerance strategies. This bigger picture gives investors more options and improved paths to better outcomes.
As such, by seeking advice, investors have the benefit of an adviser's experience. They understand the industry and follow best practices. When using their services, investors can take advantage of that information and experience, helping them to become more confident in their investments and in their financial future.
By Nigel Green
The writer is the founder and CEO of deVere Group. Views expressed are his own and do not reflect the newspaper's policy.
