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Investment professionals reveal increasing concerns about geopolitical risks

According to a survey by the CFA Institute, there has been increased concern over the effect of geopolitical risk in the investment profession, since the UK’s decision to leave the European Union in July 2016.

The survey of  1,500 investment professionals from around the world revealed that changes to the geopolitical environment is widely expected to have long-term impacts on the financial markets. The majority of respondents (70%), expect investment returns to be compromised by geopolitical uncertainties over the next three to five years.  On the other hand, the risks identified by a large majority of portfolio managers (71%) say that they have not changed their strategy as a result of the Brexit vote.
  
The survey also revealed that nearly three quarters of respondents from continental EU countries expect firms in their market to reduce their presence in the UK as a result of Brexit. Additionally, the results reflect a growing belief that Brexit will spark further exits from the EU. Of respondents, 59% believe that further exits from the EU are likely, a 10% increase since the last CFA election which was carried out in July 2016 and focused on the likely impact of Brexit.

Those who think that EU wholesale disintegration is likely has also risen from 21% to 36%. Also, the UK fragmentation that would be caused by a successful Scottish independence referendum is also considered probable by just over half of respondents (53%).
  
Paul Smith, president and chief executive of CFA Institute (pictured), said: “The current state of political uncertainty ahead of Article 50 being triggered is having a clear impact on investment professionals’ market expectations and it is important to remember that geopolitical risk is by no means new: apart from the 20 years following 1989 and the fall of the Berlin Wall, geopolitical risk has in fact been a constant feature of financial markets. We are enabling our global members and charter holders to understand the potential impacts of such shifts and ensure that they are equipped with the knowledge and skills to safeguard investors’ interests.”

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