When David Cameron announced in February that the referendum would be held on 23 June, the market was initially confident of the UK’s continued membership within the EU. In recent weeks, though, the polls have tightened considerably to the extent that some have even put the Leave campaign marginally ahead. Unsurprisingly, this has led many short term investors to reduce their exposure to UK assets. According to the Investment Association, net redemptions from funds within the UK All Companies sector were £669m in April alone. This shift in sentiment has led to a widening of discounts at which UK equity investment trusts are trading to their net asset values, from as narrow as 3% during the past 12 months to almost 10% on average at the time of writing.
After months of speculation, the outcome of the referendum is now just around the corner. In the event of Brexit, ongoing uncertainty is likely to induce further risk aversion and a spike in volatility. On the other hand, a vote to stay should – all things being equal – lead to something of a relief rally as investors absorb the more certain implications of the UK remaining within Europe. In the meantime, there are a number of good quality investment trusts trading at attractive discounts for those willing to take a long term view.