The Brexit Unknown—Britain's Boom or Bust?

Abstract

This case invites students to assess the impact that Brexit, the withdrawal of the United Kingdom from the European Union, might have on a New York–based hedge fund's portfolio and, specifically, its UK assets. The case is designed to prompt students to make market assumptions and investment hypotheses based on a combination of numerical data and qualitative information. It requires no numerical computations; instead, it asks the student to interpret both markets' short-term reactions to the Brexit vote and strategy shifts from UK and European business leaders in order to evaluate longer-term implications for the economies of the United Kingdom, Europe, and the world. Excerpt UVA-F-1780 Rev. Jun. 28, 2017 The Brexit Unknown—Britain's Boom or Bust? “Brexit would make some people very rich—but most voters considerably poorer.” -George Soros, billionaire investor, June 2016 Chuck Todd sat on his hedge fund's New York trading floor on October 20, 2016, scouring the Financial Times and Bloomberg websites for any new insights on the lengthy process of the United Kingdom withdrawing from the European Union (EU), popularly termed “Brexit.” Ever since the country's historic EU membership referendum held on June 23, the results of which shocked the world with a narrow majority (52%) of UK citizens voting to leave the EU after more than four decades of membership, details failed to elucidate both a clear timeline and framework for Britain's soon-to-be independent relationship with the EU, leaving the country in an extended state of economic, political, and social uncertainty. Todd's fund held a number of UK assets in its portfolio, and he hoped to determine how the terms of Brexit might impact not just the $ 2.9 trillion British economy as a whole but also the multiple sectors within it. . . .