A year after U.K. citizens voted to leave the European Union, more questions than answers remain for European pension funds and other institutional asset owners working to assess the risks associated with the U.K.'s surprise decision to exit the bloc.
And currency risk is far from the only peril on their radars.
For some pension funds, Brexit is expected to prompt allocation adjustments to U.K. alternatives and equities due to concerns about the country's economic growth and London's declining status as Europe's premier financial hub.
Market implications for the investment community also are yet to be seen, with the U.K. government attempting to strike the least disruptive deal to managers' business interests. Despite reassurances from both U.K. and EU regulators, key matters such as the regulatory status of money management firms remain unclear.
Britain's June 8 election also raised questions regarding the Brexit negotiations, at least in the short term.
While Prime Minister Theresa May's plan to capture additional seats in Parliament backfired — her Conservative Party lost a majority — Ms. May said at a news conference on June 9 that she would be forming a coalition government with the Democratic Unionist Party. The DUP platform is pro-Brexit, but advocates a softer approach than the Conservatives.
Should the Brexit negotiation process be prolonged beyond March 2019, it likely will further affect equity and real estate valuations, sources fear. Further contagion could still be in the cards if other European countries decide to follow Britain or if the U.K.'s swift exit deal is derailed, industry sources said.