Whatever else one can say about
2012, one thing is certain that the focus on politics as a key issue for wealth
managers and their clients has increased. The days when people assumed that
history had ended and life would be about the inevitable triumph of market liberalism
look to be over.

For Tina Fordham, a senior
political analyst at Citi, the last 12 months have seen the surge
in what she and her colleagues refer to as “vox populi risk” – referring to the
rising political volatility of nations, increased demonstrations and social
strife.

“The
state has returned; citizens are experiencing deteriorating
living standards and are concerned about the
erosion of social safety nets,” she told this publication in a recent
interview.

“When
I started doing political research it was primarily about emerging markets.
Since the financial crisis we have returned to the rise of political risk in
developed markets as well as in emerging markets. This is new territory for
investors under the age of 70,” she said.

Current
events, as seen in the political wrangles in the US over the “fiscal cliff” issue,
bear out this statement. The past year has seen a continued focus on the threat
of a breakup to the eurozone; the US
elections highlighted the polarisation of the US and its fiscal and economic
problems. In Japan, a more
assertive government was elected; in France, socialist Francois Hollande
beat incumbent Nicolas Sarkozy, with the former raising taxes and prompting
high-profile French citizens to flee. In Greece, there are fears of
political extremism amid the austerity. In Spain,
a country wracked by monstrously high youth unemployment, there are mutterings
of secession by regions such as Catalonia.
There is the risk of an escalating spat between China
and Japan over some tiny
islands in the East China Sea. And then there
is the Middle East.

Guiding clients

Fordham brings plenty of experience to her role. She joined
Citi in 2003 and once worked as an adviser in the UK prime minister's office. She is based
in London and is a native of northern California. Fordham is an
associate fellow at Chatham House and a member of the World Economic Forum's
Global Agenda Council on Strategic Foresight.

She
is in demand. Fordham and her colleagues spend time educating clients about
such risks and how to take account of such developments when framing their
investment policy or approach to certain countries and asset classes. Her work
has never been more sought after, she said. Fordham's insights are shared across the firm, including Citi Private Bank. 

“Political
analysis research is consistently in the top three forms of research read by
clients in our banks,” she said.

This
is unlikely to change soon, Fordham said, because one of the underlying reasons
for the rise in political risk in developed countries such as parts of Western Europe, is slow economic growth and the rising
strains on decades-old Welfare States.

“In
our work here, we think what we are looking at is more than a change in elections
and a more significant recalibration between the government, the individual and
the market,” she said.

Approval
ratings can fall sharply; six months after the election of Francois Hollande as
president of France,
for example, his approval ratings have sunk by about 20 percentage points.

“We
are looking at the politics of slow growth,” she added.

Economic
growth – in the West at least – may indeed be slow. But if recent trends
continue, demand for Fordham’s expertise, and for that of other risk analysts
in similar fields, is likely to be anything but slow.