WATCH: Adjust expectations of returns after Brexit - economist

2016-07-17 18:05
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Cape Town - The key fundamental thing to remember in the post Brexit vote world is that investment returns are going to be lower, according to Rian le Roux, chief economist of the Old Mutual Investment Group.

"One thing we have seen after the Brexit announcement is a lot of volatility in the markets. I think what Brexit means over the longer term is a world economy that is struggling," he explained.

"And a slow growing world means relatively low investment returns, which means people have to save more."

Le Roux emphasised that he always argues in favour of diversifying an investment portfolio, whether it means putting money in a rand hedge investment or directly offshore.

"We are looking at a difficult world. You should have a diversified portfolio, but adjust your expectations about returns," he said.

At the same time, he pointed out that the surprise so far regarding Brexit has been that the rand has actually firmed contrary to people's expectations.

"But this is early days and we do not know if the UK will actually exit the EU," he added.

Given the level of the rand at the moment, he said a lot of people are taking money offshore in anticipation of it weakening even more. Le Roux, however, thinks the rand has weakened because it was simply too strong, but has adjusted now.