Blog: Avoiding Geopolitical Risk

By Jeff Pollock

Geopolitical risk often accompanies images of foreign jurisdictions where its people lack the right to vote, lack the ability to express their opinions without fear, and lack the freedom to freely pursue the livelihood of their choice.

There’s a difference between a geopolitically risky jurisdiction and one that experiences temporary unrest.

Over the last several days, Canada has commanded headlines by the international media. In addition to protests in Ottawa, a convoy of truckers blocked the Ambassador Bridge for several days, cutting off the link that is responsible to moving $400 million of goods across the border each day (20% of Canada-US trade). Major roads in Downtown Toronto, including the Gardiner Expressway and Don Valley Parkway, were also shut down last Saturday in anticipation of local protests.

This type of disruption will pass. Canada is not a geopolitically risky jurisdiction.

Fifty years ago, the father of Canada’s incumbent Prime Minister invoked the War Measures Act after a British diplomat and Quebec cabinet minister were abruptly kidnapped by a domestic terrorist group. Despite this unfortunate period in Canadian history, the crisis concluded with several conviction and the country returned to normal. Similarly, these protests will eventually conclude.

Last year, Alibaba’s founder Jack Ma disappeared for several months after criticizing China’s government. This week, Russian President Vladimir Putin has sent mixed signals to the free world regarding his intention to invade the Ukraine. Many emerging markets have expropriated assets belonging to foreign companies. These are countries that represent a clear geopolitical risk and for that reason, we avoid buying stocks with significant exposure in their regions.

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