The UK’s decision to leave the EU could lead to a home country bias developing among investment firms and a prolonged “risk-off” environment, analysts at Jefferies claim.

In a note to clients, equity research experts at the investment bank highlighted some of the potential shifts in fund flow trends that could begin to arise globally in the Brexit aftermath.

“The potential of a prolonged “risk-off” environment prevailing continues to increase. In such a scenario, the investment framework through which we view the asset managers begins to change,” wrote New York-based equity analyst Daniel Fannon.

“More specifically, we would expect overall industry flows to become more muted, with flows into fixed income products accelerating, while equity flows do the opposite.”

Following Britain’s surprise vote to leave the EU, Fannon adds that as investors wait out the knock-on effects from trade restrictions, tariff negotiations, and other macro impacts of the UK departure, we will likely see a "home country bias" develop.

This could be especially true for US investors as the dollar continues to strengthen against most major currencies.

With respect to EU countries as a whole, Fannon points out that it has already been a challenging year with -€51B in net long-term equity outflows year-to-date (vs. +€55B in the second half of 2015) with the potential for that number to accelerate meaningfully post the UK/EU dislocation.

He reckons with near-term demand for global equities facing uncertainty and intermediate duration fixed income mainly for those who have asset-liability management needs, high yield fixed income and higher dividend yielding funds will likely remain in demand.

Alternatives, and more specifically, longer dated traditional private equity, real estate, and infrastructure, should also help fill the yield void.