UK challenges centred on currency, but future role Fig 9. Exchange rate, geographic allocations tothe UK(% AUM) Hi 2016 as European hub is unclear M2017 While the UK has faced short-term challenges over low interest rates (relative to the US), the Brexit decision . . poses a threat to the long-term attractiveness of GBP/USD exchange rate Cree Tale Ce eis the UK. Brexit is seen as a significant negative for (External data) to the UK (% AUM) UK investment, and investment sovereigns with (Sovereign sample) European interests questioned the future of the UK as an ‘investment hub’ for Europe, given uncertainty over taxes on imports and market access. Liquidity 1.48 sovereigns also noted their concern that demand for 45 UK government bonds would drop, challenging the liquidity of their holdings. Despite this negative sentiment, UK allocations remain relatively stable with stated declines likely linked to currency fluctuations rather than withdrawal, as demonstrated in figure 9. Furthermore, the fall in value of the pound has led to a rally in UK stocks as export-linked businesses benefit from more competitive pricing. The low value of the pound also - allows UK asset managers to offer their services at ‘1.23 3.8 a discount to international competitors. This low entry price into the UK represents an opportunity for UK managers who can demonstrate local market expertise and robust currency hedging processes to international sovereign investors. There has also been a demonstration of ongoing sovereign commitment to long-term alternative investments in the UK. Many sovereigns noted that they were unlikely to cancel UK real estate assets in the near future and there have been several high-profile statements of renewed commitment to UK infrastructure investments following the Brexit decision, including Thames Water and Heathrow Airport. However, respondents noted that these are long-term investments which are unlikely to move until the outlook of the UK as a preferred investmen