• Stuart Fowler

Surviving a Marxist experiment

In a new paper we address clients' questions about the possible consequences of a Labour Government able to force through an overt or hidden Marxist agenda, together with possible mitigating actions.

Read the paper here.

From the Introduction

"Fowler Drew’s approach to goal-based investment plans does not rely on taking a view. Clients, particularly those close to or already drawing from capital, want to be sure their plans are resistant to worst-case outcomes at the level of certainty they require. They want to know if plans made on the basis of a model of probable real returns are robust to a Labour Government which is not merely pushing for more redistribution within a mixed ‘welfare/market’ economy but willing to take extreme risks with the economy for ideological reasons. Many of its current leaders and key influencers have, after all, harboured a lifetime commitment to destroying the market economy on which our return modelling depends. For the purposes of this paper, we will refer to this version of a Labour administration as a self-professed ‘Marxist experiment’."

Key conclusions for clients

  • Our framework of modelling outcome probabilities, allowing stress testing of goal-specific portfolios, is a good one for assessing survivability of a Marxist experiment, which is really more useful than estimating its subjective chances

  • We believe the worst portfolio effects (both return impacts and implementation issues such as exchange controls) are in fact within the range of probabilities already captured in our modelling of pre-tax goal outcomes

  • Clients may nonetheless quite rationally want to replan their contributions or their spending targets; the required confidence for outcomes; or the way they have hitherto made the trade-off between future real outcomes and current portfolio volatility

  • Because spending outcomes depend on tax rates, clients may want to decide with us how prudent to make their tax assumptions, at least for part of the plan duration

  • The scope for forestalling actions appears limited: many of the obvious actions would be negated by existing legislation let alone new anti-forestalling measures or penalties

  • There are several specific mitigating actions but they carry a high opportunity cost, unless they merely alter the scale or timing of things clients planned to do anyway or close off some optionality they would have preferred to keep open.


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