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Money Editor for NZ Herald

Tamsyn Parker: How to "Labour-proof" your portfolio

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What should you do to protect your investments should there be a change in government and a switch to Labour?

Labour leader David Cunliffe (centre) and finance spokesman David Parker (L). Photo / Dean Purcell.
Labour leader David Cunliffe (centre) and finance spokesman David Parker (L). Photo / Dean Purcell.

The polls are pointing to a National-led government being re-elected in this year's September 20 election but the race is never over until the votes are counted.

So what should you do to protect your investments should there be a change in government and a switch to Labour?

www.nzherald.co.nz talked to three experts about how to "Labour-proof" your portfolio.

Hedge your bets

Mark Lister, head of wealth research at Craigs Investment Partners, says it's important people's portfolios are positioned for either a blue or a red outcome.

"Ultimately, we do not believe growth in our economy will be significantly impacted by of the outcome of the election."

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But he recommends limiting exposure to sectors and companies with potential downside risk and increasing exposure to those who are likely to be less affected.

One of the most exposed sectors could be electricity companies with the Labour party promising to shake-up the sector to reduce costs to consumers.

But Lister doesn't believe investors should exit energy stocks completely.

"Taking a bet on all or nothing is too risky. If you make the wrong call you could lose out big time."

If energy stocks make up 20 per cent of your investment portfolio Lister suggests winding it back.

"Hedge your bets and have your bases covered."

Likewise he recommends limiting exposures to companies that may face added regulatory scrutiny under a Labour-led government including Sky City Enertainment Group and Sky Television.


Mark Lister, head of wealth research at Craigs Investment Partners. Photo / APN

Instead he suggests investors add exposure to those with less regulatory risk such as Metlifecare, Trade Me, Freightways or SLI Systems.

"Companies that are already regulated, such as Vector and Auckland International Airport, may also be more insulated from any potential changes."

If a Labour-led government was voted in some sectors could also benefit. Labour has promised to try and get the Kiwi dollar down if it gets into power.

Lister says export focused companies would be winners in this case.

Labour is also more likely to provide additional support for low to middle income earners which could support some retailers like The Warehouse or Hallenstein Glassons.

Compulsory KiwiSaver is also on the cards if Labour wins the election.

Lister says that would be good for the share market.

A proposed capital gains tax could also help the share market as it would potentially make rental property less attractive.

"Rental property is much more dependent on capital gains for returns."

Lister says the tax could level the playing field and make shares more attractive for investors.

For investors who are particularly worried about the election Lister recommends putting more money into Australian and overseas shares.

Be aware of the risk

Bernard Doyle, head of strategy at JBWere, says it is a bit of a dangerous game trying to re-jig your investment portfolio depending on what is going on in the world of politics.

"You can tie yourself in knots." But he says it is important to be aware of the risks. The election and the political uncertainty around it was part of the reason why Doyle recommended clients underweight their New Zealand investments in December last year.


Bernard Doyle, head of strategy at JBWere.

"Unlike most prior elections this one is most likely to have a material affect on equities," he says. That and the fact that share price valuations on the New Zealand market are very high means opportunities in off-shore markets look more attractive.

But for those who still have money in the New Zealand share market Rickey Ward, head of equities at JBWere, says Labour has typically been a higher spender than National and tends to focus on improved education, affordable housing and regulation.

One stock he reckons should do well under either party is construction company Fletcher Building.

"It should do well under any circumstance." Wards says Fletchers should benefit from the Christchurch rebuild as well as a rebound in the building industry.

As well as being wary about the electricity sector Ward says investors should be cautious about Sky City, Sky TV and the telecommunications companies.

"How do you future-proof against regulation? It is very difficult." He suggests Infratil could be one way to get a cheaper exposure to the sector.

Ward also suggests targeting companies whose fortunes are not linked to the domestic economy such as exporters, healthcare companies like Fisher & Paykel Healthcare and those in the IT sector.

One area where investors could make a local play is in property companies with office space in Wellington as more space may be needed for government staff if there is a change in government.

Too late for change

Rob Mercer, head of private wealth at Forsyth Barr says concerns about politics becomes very much top of mind when you are in an election year but elections happen every three years and shouldn't be the biggest factor in determining whether you invest in a particular company.

Mercer says the reality is if you are already invested in certain stocks that have been drawn into politics then its too late to worry about the impact now.

If you haven't invested yet then there is no need to rush in before the election, then you don't have to deal with the uncertainty.

"You can wait until after the election. It's hard to find significantly undervalued investments at the moment so there's no need to rush to buy in."

Mercer says there areas where he sees the most value for risk are those that have already been caught up in the politics such as Vector, the electricity companies and Chorus.

"We see them as having factored in the election and offering good value. You are getting value for that risk."

But Mercer says once the outcome of the election is known those stocks may no longer offer value.

"Once you know the outcome you will have missed out."

He says the downside risk of a bad outcome is less than the upside risk.

- NZ Herald

Tamsyn Parker

Money Editor for NZ Herald

Tamsyn Parker is the NZ Herald's Money Editor. A business journalist for ten years, she has worked in the UK and NZ for the New Zealand Herald, the National Business Review and a specialist publication on investment products for financial advisors. She is passionate about helping readers learn more about to make their money work for them.

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