Investors should recognise political risk
Australian investors need to spread their wealth across different types of investment vehicles to better factor in the uncertain political outlook and its significant role in wealth creation, according to Lifeplan.
Head of Lifeplan Funds Management, Matt Walsh, warned that local investors traditionally associated political risk with foreign countries with unstable governments.
"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 outlook can have," Walsh said.
"Couple this with ongoing leadership concerns in the UK, the unknown impact of Brexit, and the Trump factor in the US, and political risk is currently a major influence for Australian investors."
He pointed to superannuation, where most Australian had a large portion of their wealth, and how the politicians were tinkering with it, particularly the tax components, as one example of how political instability might directly impact investors.
Therefore, investors should consider other ways of holding assets to complement super, rather than replace it, to diversify their wealth.
He recommended four main vehicles that investors could use when holding assets, other than investing in one's own name, or that of a partner:
- Via family trusts (taxed at marginal rate) or family companies;
- Superannuation (taxed at 15 per cent, or zero per cent in pension scheme);
- Investment bonds (taxed at 30 per cent or less with the imputation system); and
- Companies (at 30 per cent tax rate).
"To reduce the impact of political risk on long-term savings, investors should ideally spread their wealth across three types of vehicle," Walsh said.
Recommended for you
Perpetual has seen AUM rise 6 per cent in the last quarter but the departure of a longstanding JOHCM fund manager led to outflows of $2.2 billion from his strategy.
In the latest Meet the Manager profile, Money Management speaks with Michael Skinner, founder and managing director at Blackwattle Investment Partners.
Global fixed income fund Bentham Global Opportunities has been added to several major platforms, enabling it to be accessed more easily by financial advisers.
Following yesterday’s news about First Sentier Investors closing four investment teams, a second global asset manager has announced it is closing its only dedicated Australian fund.
