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Portfolio diversity key to managing political risk

Killian Plastow
— 1 minute read

Fund manager Lifeplan has warned political risk should be a “significant consideration” when Australians make investment decisions.

Lifeplan head Matt Walsh says Australian investors typically associate political risk with “foreign countries with unstable governments”, but he cautions that Australia is not immune to similar hazards.

“Recent global events should remind us that every country has a degree of political risk and Australian investors should now appreciate the impact on markets our own uncertain political outlook can have,” he said.

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Mr Walsh said political risk is “currently a major influence for Australian investors” as a result of the UK’s recent Brexit anxiety and leadership uncertainty, as well as the “Trump factor” in the US.

Protecting from political risk “clearly” requires diversification of asset classes, but Mr Walsh said the need to diversify how investments are held is “not so widely understood”.

“The political risk in the choice of investment vehicles also needs to be considered,” he said, adding that superannuation is a prime example of a vehicle subject to these risks.

“We are reminded time and again that politicians cannot stop themselves from tinkering with super, especially the tax aspects that are what make superannuation so attractive as an investment vehicle,” Mr Walsh said.

Mr Walsh suggested investors should “spread their wealth” across different types of investment vehicles, such as family trusts, superannuation, investment bonds and companies, which are each taxed at different rates.

 

Read more:

Rising government debt ‘worrisome’, says HSBC

Global growth lower than expected: SSGA

Russell Investments adds to super board

AAA downgrade won’t be ‘the end of the world’

NAB merges superannuation funds

 

Portfolio diversity key to managing political risk
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