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IMF / INVESTMENT
STORY: IMF / INVESTMENT
TRT: 2.34
SOURCE: IMF
LANGUAGE: ENGLISH / NATS
RESTRICTIONS: NONE
DATELINE: 13 SEPTEMBER 2011, WASHINGTON, DC
RECENT, SAO PAOLO, BRAZIL
1. Wide shot, street
2. Med shot, shopper walking
3. Med shot, people looking in window
13 SEPTEMBER 2011, WASHINGTON, DC
4. SOUNDBITE (English) S. Erik Oppers, Monetary and Capital Markets Department:
“We looked at investment drivers for long-term investors. Those are investors with a long time horizon for their investments that invest their own money, and particularly don’t use borrowed money to invest. And when we looked at that in detail we found that the drivers for these investors are particularly good growth prospects in the countries where they invest and stable macroeconomic conditions, good political systems, and particularly we found these investors don’t look at interest rate differentials between countries in deciding where to invest.”
RECENT, JAKARTA, INDONESIA
5. Med shot, person counting money
6. Tilt down, from face to money
13 SEPTEMBER 2011, WASHINGTON, DC
7. SOUNDBITE (English) S. Erik Oppers, Monetary and Capital Markets Department:
“Well, there are good indications that investor behavior has changed since the crisis. Most importantly, investors have become more conscious of the risks in their portfolio. These risks include a liquidity risk, which is the risk that you may not be able to sell your asset when you want to, and also credit risk, which is the risk that you may not get your money back. That credit risk also includes the risk of sovereign bonds, government bonds. For now, investors don’t assume anymore that these are risk-free, and so there are good indications that those -- that the investors have changed their behavior since the crisis.”
RECENT, TOKYO, JAPAN
8. Tilt down, Tokyo Station Markets Board
9. Close up, man looking at numbers
10. Close-up numbers
13 SEPTEMBER 2011, WASHINGTON, DC
11. SOUNDBITE (English) S. Erik Oppers, Monetary and Capital Markets Department
“Sovereign investors are becoming more and more important. These are the investors that invest a country’s national wealth, which may include international reserves and receipts from oil and mineral wealth. And their assets have grown a lot in the past decade. They have a truly long-term view and, as such, they can have a bigger and bigger role because some of the private investors, as we’ve seen, have become more risk-conscious, which tends to give them a shorter-term view. So we think that there’s an opportunity there for sovereign investors to take on some of the longer-term risky investments that private investors now avoid.”
RECENT, BEIJING, CHINA
12. Wide shot, shopping street
13. Wide shot, People crossing street
14. Wide shot, billboard
In a new study, the International Monetary Fund has found that long-term investors do not look at differences in interest rate among countries when deciding where to invest.
It turns out the factors they do consider in making these decisions are good and stable growth prospects, low country risks—including political and economic stability—and a stable exchange rate. This all makes good sense for long-term investors such as pension funds and insurance companies.
“We looked at investment drivers for long-term investors. Those are investors with a long time horizon for their investments that invest their own money, and particularly don’t use borrowed money to invest. And when we looked at that in detail we found that the drivers for these investors are particularly good growth prospects in the countries where they invest and stable macroeconomic conditions, good political systems, and particularly we found these investors don’t look at interest rate differentials between countries in deciding where to invest,” said S. Erik Oppers, the study’s author.
Interest rates do not matter for these investors. The IMF looked at short-term interest rates, long-term interest rates, real interest rates, and nominal interest rates. Institutional investors did not respond to any of them, for investments in equities nor bonds.
For now, most of these institutional investors are biding their time, accepting lower returns without moving funds to countries with higher interest rates and perceived higher risk, or into other riskier domestic assets. The longer the low interest rates prevail, the more difficult the financial situation of these investors becomes and the higher the pressure for them to “search for yield.”
“There are good indications that investor behavior has changed since the crisis. Most importantly, investors have become more conscious of the risks in their portfolio. These risks include a liquidity risk, which is the risk that you may not be able to sell your asset when you want to, and also credit risk, which is the risk that you may not get your money back. That credit risk also includes the risk of sovereign bonds, government bonds. For now, investors don’t assume anymore that these are risk-free, and so there are good indications that the investors have changed their behavior since the crisis,” Oppers said.
The IMF said that the change in investor behavior may open up opportunities for investors of sovereign wealth.
“Sovereign investors are becoming more and more important. These are the investors that invest a country’s national wealth, which may include international reserves and receipts from oil and mineral wealth. And their assets have grown a lot in the past decade. They have a truly long-term view and, as such, they can have a bigger and bigger role because some of the private investors, as we’ve seen, have become more risk-conscious, which tends to give them a shorter-term view. So we think that there’s an opportunity there for sovereign investors to take on some of the longer-term risky investments that private investors now avoid,” Oppers said.
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