There’s concern on the financial markets that the current geopolitical risks will increase the pressure on investment returns in the coming years, according to Christian Dreyer, the CEO of the CFA Society Switzerland.
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A large majority of investment managers (70 percent) believes that the current geopolitical risks will generate substantial pressure on capital market margins in the coming three to five years. This is the result of a survey by CFA Institute among 1,500 financial experts globally. CFA Institute is an association of professional investors and investment managers.
The development of Brexit is one of the main uncertainties. About 70 percent of U.K.-based participants expect the planned exit from the European Union (EU) will have a damaging effect on the U.K.’s competitiveness. An similar-size majority of investment experts based on the continent thinks that globally active companies will scale down their presence in the U.K.
The biggest winners from Brexit among financial markets likely will be Frankfurt (77 percent), followed by Dublin (63 percent), Paris and New York (58 percent each).
«Brexit so far was exclusively about party-strategic hopes and worries»
Ironically, no less than 59 percent of the surveyed believe that further countries will likely leave the EU. That’s a 10 percent increase compared with the most recent survey by CFA Institute in July 2016.
Brexit so far was exclusively about party-strategic hopes and worries, definitely no solid ground for forming opinions on the financial markets. The coming 24 months however will definitely create new realities in the EU. And they will provide a basis for much more robust expectations.
«Uncertainties surround U.S. economic policy and French presidential elections»
Participants of the survey were asked to name further geopolitical risks, apart from Brexit. Risks that will affect financial markets and investments in securities. Asset managers foremost mentioned the uncertainties surrounding the U.S. economic policy and the presidential elections in France.
Geopolitical risks and their impact on financial markets aren’t a new phenomenon. With the exception of the two decades following the fall of the Iron Curtain in 1989 until the financial crisis of 2008/09, these risks have been a constant companion. However the reach of populist movements in developed nations and their ripple effects, as illustrated by the BridgeWater Developed World Populism Index (see chart), is new.
In the case of such a situation, it is paramount that investors can rely on the advice of highly qualified experts, who live up to the expectations. In other words: watch out, there are turbulent times ahead!
Christian Dreyer, 50, studied political science at the University of St. Gallen (HSG). He acquired a Master of Laws at the University of Edinburgh.
In 1994, he started his professional career as an assistent to the CEO of Solothurner Kantonalbank, which was in need of restructuring. In 2000, he mastered the merits of a Chartered Financial Analyst (CFA) and became the head of investment research at Basler Kantonalbank. Dreyer most recently acted as an executive director for J.P. Morgan (Switzerland) responsible for relations to institutional investors in Switzerland and Liechtenstein. In April 2013 he became CEO of the CFA Society Switzerland.
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