How to build a safer portfolio. Plus the 4 ASX stocks and strategies 3 fundies recommend

"From a first-principles perspective, the true flight to safety is no longer just cash or bonds; it is physical certainty."

So argues Emanuel Datt of Datt Capital — and it is a provocation that reframes how investors should think about building portfolios in an era of persistent geopolitical uncertainty.

Geopolitical risk is no longer a single event to hedge. Shocks are arriving more frequently, overlapping before the previous one has resolved, and leaving lasting marks on inflation, supply chains and the assumptions underpinning how portfolios are built. 

The traditional toolkit – rotating into bonds, cash or gold when tensions rise – is being tested by an environment where correlations break down at precisely the wrong moment. Diversification does not always protect you when you need it most.

The managers in this Q&A approach that challenge from different angles.

Wilson Asset Management's Damien Boey and Matthew Haupt bring a macro lens, tracking how geopolitical stress flows through inflation dynamics, bond-equity correlations and the structural plumbing of financial markets.

Datt builds from the bottom up, anchoring his thinking in tangible assets with durable competitive advantages over financial abstractions.

Together, they make the case that geopolitical uncertainty is no longer the exception investors brace for. It is the baseline they need to build for.

Rethinking how markets price geopolitical risk

From a macro perspective, Damien Boey and Matthew Haupt of Wilson Asset Management argue that traditional market signals are masking more than they reveal.

Measures like the VIX and MOVE “do not reflect the current state of policy uncertainty in the world,” largely because “there is still plenty of liquidity in the system… suppressing risk pricing.”

In other words, stability is being engineered, not earned.

Emanuel Datt reaches a similar conclusion from the bottom up, but frames the problem differently. The issue is not whether risk is visible, but how it is understood.

“The underlying mispricing lies in the duration and physical impact of supply-side constraints and how these affect company earnings further downstream.”

Geopolitical risk is not being ignored. It is being underestimated in how long it lasts and how far it spreads.

Diversification is no longer a given

A core assumption of portfolio construction is that diversification protects capital. That assumption is becoming less reliable.

Damien Boey and Matthew Haupt of Wilson Asset Management highlight how supply-driven inflation is changing the relationship between asset classes.

“De-globalisation and supply chain disruptions tend to boost inflation uncertainty… reducing the degree of diversification in multi-asset portfolios and increasing risk.”

When correlations rise, the protection investors expect from holding bonds alongside equities can evaporate at precisely the wrong moment.

But the challenge runs deeper than correlation. As Emanuel Datt argues:

“Safe haven assets such as bonds, gold and the US dollar… may fail because they rely on financial stability rather than physical reality.”

If the hedges themselves cannot be relied upon, the entire architecture of a defensive portfolio comes into question.

This breakdown is not permanent. As growth slows and demand weakens, inflation can shift from supply-driven to demand-driven, and bonds can quickly reclaim their defensive properties. But knowing which phase you are in, and repositioning accordingly, is now a core investment skill.

What actually works in a crisis

If diversification is less reliable, then what holds up? 

For Datt, the answer lies not in finding a better financial instrument, but in moving away from financial abstractions altogether. He favours assets with "strong balance sheets and cash generative operations" that "retain the optionality to act while others are forced into distressed decisions."

Boey and Haupt take a more conditional view. In a crisis involving credit stress and disinflation, bonds can still perform – but they caution that "the plumbing of the financial system is near immaculate, such that credit and money markets are somewhat insulated from growth slowdowns," making crisis plays shorter and sharper than history might suggest. Timing and discipline matter as much as the position itself.

Hedging is a sequence, not a position

Damien Boey and Matthew Haupt of Wilson Asset Management are explicit that geopolitical risk cannot be addressed with a static allocation.

“Geo-political risk presents a journey for investors to navigate rather than a static portfolio allocation. Importantly, even without peaceful resolution of conflicts, there is a need for a dynamic approach to positioning.”

In the early stages of conflict, they favour long commodities, short-duration exposure and defensive equities. As the cycle matures and demand weakens, bonds and long-duration assets “can very quickly recover their shine.”

Datt’s equivalent is holding cash as optionality, not a defensive endpoint, but a tool that allows portfolios to “compound through the chaos, rather than just survive it.”

Hedging geopolitical risk is not about finding the right asset, but about sequencing exposures and retaining the flexibility to move as conditions evolve.

Where resilience lives right now

Both managers point to assets anchored in real-world demand and structural constraints – businesses that benefit from the same forces creating uncertainty elsewhere.

Datt favours Australian petroleum refiners Ampol (ASX: ALD) and Viva Energy (ASX: VEA), which he sees as critical national infrastructure benefiting from tight global energy markets and rising government support for energy security.

"Both have the benefit of vertically integrated operations that have come about as a consequence of M&A in recent years, which should temper the volatility of earnings from the mid-stream energy business."

He also holds WiseTech Global (ASX: WTC) for its pricing power and sticky recurring revenue – competitive advantages that hold up through macro turbulence.

Boey and Haupt favour quality and duration – long-dated CBA tier 2 bank debt for its safe haven characteristics and rate-cut upside, and Goodman Group (ASX: GMG) as "quality growth at a reasonable price," well-positioned for falling yields and unlikely to be caught in domestic cyclical weakness.

Looking beyond current conflicts, they flag a risk that most portfolios are not yet built for.

"AI uncertainty is likely to take over from geopolitical uncertainty."

And unlike geopolitical shocks, it operates differently. "AI is a non-cyclical force with potential cyclical consequences," meaning the speed of disruption could cause disorderly adjustments across businesses and labour markets.

Resilience, in that world, means more than surviving the next conflict. It means owning businesses that will not be rendered obsolete by the one after that.