OREANDA-NEWS. Brexit Impacts European and UK Funds Differently London Fitch Ratings says that funds of European assets (European funds) underperformed funds of UK assets (UK funds) in June, thereby suffering more from Brexit in the short term, in absolute, local-currency terms. UK funds, however, did worse than European funds, relative to benchmark. On average, most funds, both UK and European, underperformed their benchmarks in June.

The major European fund categories underperformed UK fund categories in local-currency terms in June 2016. Relative to benchmark however, European funds showed a better performance than their UK counterparts in local currency. For instance, Fitch estimates that 27% of European equity funds outperformed their benchmarks in June, net of fees compared to only 10% for UK equity funds.

Major UK and European fund categories underperformed their benchmarks in June, according to Fitch's estimates. This suggests that portfolios were constructed around a central scenario that the Remain vote would win, albeit mitigated for some by defensive positioning relative to benchmarks.

Fixed-income fund categories showed positive performance while equity funds showed negative performance in local currencies in June. Government bonds and investment-grade bonds benefitted the most from yield compression and a flight to safety.