Listed PE buffeted by Brexit market freefall

Listed firms have avoided the share price battering felt by the banks, but are not totally unscathed.

The UK’s decision to leave the European Union on Friday sent markets into a tailspin. The FTSE 100 plummeted from just over 6334 points on Thursday to just over 5800 points on Friday morning, before recovering to close the day at 6138. As at 10am today it sat at 6065.

Sterling nosedived to a 30-year low, falling from a high of $1.50 against the dollar as votes started to be counted on Thursday night to $1.33 at 5am on Friday.

Meanwhile the price of gold spiked to a two-year high as investors sold off riskier assets and sought a safe haven for their capital.

Several private equity firms listed on the London Stock Exchange have not escaped unscathed.

Shares in 3i Group fell almost 13 percent from 562 pence per share on Thursday to 489.5 pence at 11:10 today, while Electra Private Equity shares fell 13.5 percent from £40.10 to £34.67.

Others appear more insulated. Shares in Standard Life European Private Equity Trust rose from 223 pence on Thursday to 225 on Friday. Today shares are trading at 215 pence.

Shares in HarbourVest Global Private Equity, a listed company which invests in HarbourVest Partners funds, took a modest hit of 2.5 percent, falling from 917 pence per share on Thursday to 893.5 today.

HarbourVest issued a statement on Friday in response to the referendum outcome and the subsequent resignation of Prime Minister David Cameron, in which it said it expected London to remain HarbourVest’s regional hub for its activities in Europe, the Middle East and Africa.

“HarbourVest has adapted to many changes in European regulation, including the recent introduction of the Alternative Investment Fund Managers Directive, and we are confident that HarbourVest has the necessary in-house experience to handle a transition to new rules,” the statement read.

Douwe Cosijn, chief executive officer of LPEQ, the international association of listed private equity companies, told Private Equity International that although investment companies will likely be less impacted than the broader financial services sector, they are “not immune from some of the turmoil that is anticipated” and how that will impact financial services stocks.

Cosijn said a Brexit would create “both challenges and opportunities for investment”, but that in the near-term “share-price performance will invariably be impacted by the broader uncertainty across the macro-economic outlook and the financial services sector in its entirety.”

Some of the most severe beatings were taken by the banks. Royal Bank of Scotland plunged from 250 pence per share on Thursday to a current share price of 168, Barclays fell from 186.95 to 130.95 and Lloyds Banking Group plummeted from 72.15 pence per share to 51.77 today.

On Friday credit rating agency Moody’s cut the UK’s outlook from stable to negative. 

In a statement, Moody’s said that the referendum outcome “will herald a prolonged period of uncertainty” for the UK, which will have negative implications for its medium-term growth outlook.

“During the several years in which the UK will have to renegotiate its trade relations with the EU, Moody's expects heightened uncertainty, diminished confidence and lower spending and investment to result in weaker growth.”

The ratings agency added that “while the UK's institutional framework will not change, Moody's considers that policy predictability and effectiveness of economic policy-making – an important aspect of institutional strength – might be somewhat diminished as a consequence of the vote”.