Only Twenty-one percent of Millionaire households with a net worth up to $4.9 million indicated they would be investing internationally in 2015. But that may be changing.
Over the past could of years, a majority of affluent investors have said “non,” “nein,” or “nie” to international investment. Global equities have under-performed the S&P 500. As Time magazine recently reported, one index that focuses on European stocks lagged behind its U.S. counterpart by more than 13 percentage points annually.
In Spectrem Group wealth level studies conducted in the fourth quarter, just 21 percent of Millionaire households with a net worth up to $4.9 million (not including primary residence) indicated they would be investing internationally in 2015. Intent was higher among Ultra High Net Worth investors with a net worth between $5 and $24.9 million (35 percent).
When asked which countries or regions in which they would be likely to invest, a higher percentage of Millionaires indicated a preference for China over Europe (26 percent vs. 19 percent), but that represents a five percent drop vs. an 8 percent increase, from 2011, respectively).Similarly, among Ultra High net Worth investors, intention to invest in China dropped 7 percent while intention to invest in Europe ticked upward 3 percent between 2011 and 2014.
The percentage of Millionaires and Ultra High net Worth investors wanting to invest in Brazil,has dropped precipitously, 11 percent and 13 percent, respectively.
Aversion to investing in Europe is changing despite ongoing economic turmoil in countries such as Greece, which is inching closer to default as an agreement with its European Union creditors remains elusive. Europe is perhaps the poster child for the maxim “buy low.” Compared to their U.S. counterparts, European stocks have looked downright cheap of late.
A survey conducted in the first quarter of 2015 by executive search firm Armstrong International found that European infrastructure is one of the most popular asset classes among the surveyed 305 North American institutional investors. More than three-fourths indicated they are already investing in European alternatives and are considering upping those allocations. Of those not currently investing in European alternatives, three-fourths said they are considering investment in the region.
One caveat is the U.S. dollar-to-euro exchange rate, which can diminish returns. Some forecasts see European markets finishing the year 10 percent higher. Taking the exchange rate into account, an American investor would only see a 4 percent gain.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.