North American institutions plan long-term investments in foreign infrastructure and are pumping billions of pounds into Europe, according to a report from Armstrong International.
The company’s survey of 305 North American institutional investors in the first quarter of 2015 indicates that managing liabilities in a low interest rate environment is proving particularly tough. Searching for yield, they are looking for fresh opportunities in foreign markets, increasing their allocations to private equity, real estate, infrastructure and, to a lesser extent, hedge funds.
With interest rates at historically low levels, US equities hitting record highs and a strong US dollar (USD), these investors are embarking on what some economic commentators are describing as ‘a 21st Century land-grab’ across Europe in an attempt to add value to their portfolios.
Nearly four in five respondents are actively investing or planning to increase their allocations in Europe. Of the remainder, three quarters said that they are actively considering European investments.
“This is a pivot point for Europe,” said Martin Armstrong, Chairman of Armstrong International. “We’ve detected this level of positive sentiment on the part of North American institutional investors. It feels very much like a land grab. After a tepid decade, this level of investment enthusiasm implies that Europe is a re-emerging economy.”
The report finds that institutional investors have concluded that even though the assets are illiquid, they deliver a high income at a time when other traditional fixed income yields are at historic lows.
The government of China has been a substantial investor in infrastructure beyond its borders for a decade now, with some experts estimating that it is responsible for funding up to half the world’s infrastructure projects.
The Armstrong study suggests that by increasing their exposure to this sector, North American investors active overseas will add interesting competition to the marketplace.
Second and third place destinations for foreign investment are Asia and Sub-Saharan Africa respectively, Armstrong International’s survey reveals. Two thirds of those investing in Asia are planning to add to their portfolios. Only 22% currently invest in Africa, however 37% of the respondents are planning to increase their allocations to this region over the coming 36 months.
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