Hedging against a Corbyn Govt

michaels

Labour plan to renationalise at a discount a number of UK companies and to confiscate 10% of all UK shares.

I can't imagine this will do much for UK pension values should there even appear to be a threat of this happening.

Any suggestions for how to hedge against this risk. Currently I am in a balanced global fund that seems to be about 25% UK. I guess I would like to be in a fund with a lower UK exposure but perhaps a degree of currency hedge.

Thrugelmir

I wouldn't imagine a global portfolio is any less exposed to a potential raid by an incoming Labour Government. Brown did the same in 1997. Effectively killing off DB schemes with his £5bn tax raid. .

MarkCarnage

Emigrate?

Seriously though, keep your exposure global, and make it more so if that makes you comfortable.

Not sure I would want to hedge currency in that situation?

The unhedgeable risk is what might happen to pension fund tax status, or indeed whether exchange controls might reappear, or whether some kind of 'directed' investing was imposed......read my first comment again in that case....

MarkCarnage

Thrugelmir wrote: »

I wouldn't imagine a global portfolio is any less exposed to a potential raid by an incoming Labour Government. Brown did the same in 1997. Effectively killing off DB schemes with his £5bn tax raid. .

His actions certainly didn't help, but there were many other contributory factors. Also was essentially an impact on UK listed equities. Most big DB schemes were already diversifying by then.

Thrugelmir

MarkCarnage wrote: »

His actions certainly didn't help, but there were many other contributory factors. Also was essentially an impact on UK listed equities. Most big DB schemes were already diversifying by then.

The removal of dividend tax relief fundamentally changed the funding structures of DB schemes. In particular smaller ones. Making them in essence unaffordable for the sponsoring company.

hyubh

Thrugelmir wrote: »

I wouldn't imagine a global portfolio is any less exposed to a potential raid by an incoming Labour Government. Brown did the same in 1997. Effectively killing off DB schemes with his £5bn tax raid. .

Care to elucidate that...?

bostonerimus

MarkCarnage wrote: »

Emigrate?

.

I get the ironic nature of your comment.

Once you might have done a QROPS and been dinged with expensive fees, now those are not very viable. Basically it's very hard, and or, expensive to move pensions across borders. So if your pension is in the UK it will stay there even if you leave and will remain subject to UK regulations.

Malthusian

michaels wrote: »

I guess I would like to be in a fund with a lower UK exposure but perhaps a degree of currency hedge.

If you're worried about the threat of Corbyn then why hedge? If Sterling falls, as it almost certainly will under a Corbyn government, a hedged global fund will underperform compared to a non-hedged one. Global funds priced in Sterling will rise, but hedged global funds won't.

Hedging global funds is a bet that Sterling will go up, which is a strange position for someone worried about a Corbyn government to take.

You seem to have largely answered your own question - find a fund which has less than 25% in the UK. 25% in the UK is quite a lot for a "global" fund given its relative importance to the global economy.

Oh, and you don't have to emigrate, but you do have to stay near to the coastline and be ready for a swift escape if it does go completely 1917.

jamesd

• Micro-cap too small to be affected
• bigger small cap and maybe smaller mid-cap likely to be hit
• large cap and bigger mid cap may dodge by switching to non-UK base

Reducing UK mid cap and small cap holdings may be useful. The ten year implementation time and high growth of small cap suggests that shorting might not be good but options might.

Linton

It is a mistake to try to predict the future and hedge against the bits you don’t like or run counter to your prejudices. The chances are that the events you predict won’t happen, won’t have the effect you predict or something you did not predict will be more catastrophic and perhaps made worse by the measures you took to deal with your unsuccessful predictions.
A better approach is to invest on the premise that events will happen that could badly affect any part of your investments. Therefore focus on diversification so that whatever happens barring global meltdown you won’t be wiped out.
In the extreme you have to accept that your investments cannot shield you from all eventualities. Personally I am far more concerned that Tory policies will lead at worst to social collapse, or at best to the creation of a society in which I would not like to live, than anything a Labour government may do. But those risks cannot be managed through one’s investments.

Afraid_of_Kittens

IF this did happen then I can see the next Conservative Government overturning it within days of being in office.

The throaway headline sounds great 10% of shares to the workers but the policy is about transferring 10% of shares to a seperate fund. The workers will keep upto £500 each per year of any profits and the rest will go to the Government. As with anything promised by politicians it is all smoke and mirrors. As the 'workers' pension funds are invested in companies impacted by this proposal their future pension pots are being diminished. Short term gain for long term pain.

Perhaps a 1% increase of employer pension contributions would be of far more long term benefit to the workforce than the state taking a 10% control of 7000+ companies.