Jefferies CEO Sees Some Investors Harmed If Brexit Reversed

  • Handler says ‘no victors on any side’ following U.K. vote
  • Volatility ‘here to stay,’ requiring ample liquidity, CEO says

The U.K.’s vote to leave the European Union creates “no victors,” but some investors could be harmed if the country were to reverse course on its decision, Jefferies Group Chief Executive Officer Richard Handler said.

“Perhaps we have our rose-colored glasses on when we hope Europe will find a common path, but the unlikely announcement of a ‘re-vote’ by the British may cost some people more than Brexit,” Handler said Friday in a wide-ranging letter to employees that touched on markets, capitalism, politics and technology. “It is also possible to get badly hurt when the markets instantaneously bounce back the moment after you de-risked, downsized, or -- god forbid -- hedged and went short.”

Richard Handler

Photographer: Peter Foley/Bloomberg

Jefferies said last week it planned to avoid making rash decisions following Britain’s vote to withdraw from the EU. Handler told employees in a June 24 memo that the New York-based investment bank planned to “stay the course,” and avoid “formulaic, knee-jerk” actions.

In Friday’s letter, which was also signed by President Brian Friedman, Handler said the EU is much stronger with the U.K. as a member and London as its financial capital. “So, if all goes as voted, there may be no victors on any side and the likely outcome of an intermediate-term British and possibly pan-European recession.”

‘Ample Cash’

Handler said volatility is “here to stay," and that money managers need to have ample cash on hand for redemptions and to increase investments “when attractive value gets even more attractive.”

“The winds are too strong and change on a moment’s notice,” wrote Handler, 55, who is also CEO of Leucadia National Corp., the investment bank’s parent company. “The only way to stay secure for the long term is to have ample liquidity.”

Interest rates are likely to remain low for some time, amid a slow-growing and fragile economy, he said. “This means that unless you have a stomach for huge risk, you should expect and be prepared for moderate to low rates of return,” he said.

Handler described capitalism as the “the best economic model that exists,” but said those with means “must allow for a fair sharing and a safety net for those who need and deserve one.” That redistribution should be done “in an efficient and intelligent manner by an effective and balanced government.”

Political leaders must “put the citizens’ interests ahead of their own personal ambitions," he said, and suggested they strive to value “constructive, logical ideas" rather than name calling.

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