Meanwhile, the pound -- which has slid 18% since the referendum -- has been a tailwind for the U.K.’s biggest firms. The index tracked by BlackRock’s ETF “generates four-fifths of its sales revenue from outside the U.K., and as a result tends to be less susceptible to GBP weakness,” a spokesperson for the firm said.
In the latest twist of the three-year political saga, Prime Minister Boris Johnson told German Chancellor Angela Merkel a Brexit deal is essentially impossible if the EU demands Northern Ireland should stay in the bloc’s customs union.
The FTSE 100 Index was down 0.3% as of 12:59 p.m. London time on Tuesday.
The shift toward passive instruments by U.K. stock investors highlights a broader turn away from active styles. On Sept. 13, BlackRock’s FTSE 100 fund was the most heavily traded security on the London Stock Exchange, with $270 million worth changing hands, according to the firm. A U.S.-listed ETF tracking similar stocks just got its first weekly inflow since May.
While there’s a global trend of ETFs siphoning cash from active funds, there are still old-fashioned stock bulls who say U.K. equities could be in for a rally should things settle down.
“If in 4-5 months time we get a deal, we leave the EU, the Tory government does fiscal spending, U.S. investors are going to look and say that the sterling and U.K. stocks look pretty cheap and they can make an easy 25% return,” said Andrew Cole, head of multi-asset at Pictet Asset Management in London.
This article provided by Bloomberg News.