Europe is now institutional investors’ number one foreign investment target — followed by Asia and Sub-Saharan Africa, according to a report from Armstrong International, a recruiting firm for financial executives.
Based on a survey of 305 North American institutional investors in the first quarter, Armstrong International found that four in five (78%) respondents were 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, in a statement. “We’ve never 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.”
With interest rates at historically low levels, U.S. equities hitting record highs and a strong U.S. dollar, Europe — and foreign markets in general — gives these investors an opportunity to add value to their portfolios.
“In an effort to find yield, North American institutional investors are expanding their investments into foreign markets and increasing their allocations to alternative investments,” the report states.
Armstrong International says that until quite recently the majority of North American institutional investors allocated approximately 10%-15% of their portfolios to alternative investments.
But Armstrong finds that is changing, especially in regard to foreign markets.
Eighty percent of the survey respondents reported that they were planning to increase their allocations to alternative investments outside North America, making foreign markets the fastest area of growth within institutional investors’ migration to alternatives.
While Europe is North American institutional investors’ top destination, the survey shows there is also significant interest in Asia and Sub-Saharan Africa alternative investments.
Asia is the North American institutional investors’ No. 2 destination, with 61% of respondents reporting that they are actively investing in and adding to their alternative investment allocations in this region. Of the remaining investors who do not currently invest in Asia, 42% said they are considering adding investments in Asia to their portfolio.
The third foreign market on investors’ radar is Sub-Saharan Africa, with 22% of respondents saying they are actively investing in and increasing their allocation to the region and 15% saying they are considering adding investments there.
Within the foreign markets, Armstrong International finds that the demand is for the less liquid alternatives, such as private equity, real estate and infrastructure. Notably, 18% of the respondents specifically mentioned increasing interest in private equity investments in Europe. And 10% specifically told Armstrong International that European Direct Lending is a key area of interest.
During the past two years, Armstrong received a small, but increasing, number of enquiries from North American institutional investors about the establishment of direct investment activities in Europe – leading the firm to conduct this survey.
Armstrong International, a specialist executive search firm focused on financial services, surveyed chief executive officers, chief investment officers and managing investment directors at 305 North American institutional investors in the first quarter 2015.
These institutional investors included public pensions, public universities, and private foundations and endowments in the United States and Canada with reported assets under management ranging from $1 billion to more than $200 billion. The survey was not sent to investors that are already known investors in alternative investments outside North America.
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