Some pitfalls in global investing
Tatiana Didier, Roberto Rigobon, Sergio Schmukler 12 November 2012
Investment through global funds increases year on year. But how and where are global funds’ portfolios allocated? How and which recipient countries, underlying investors, and policymakers benefit? This column argues that global funds in fact represent restrictive investment practises. If we want as many countries, investors and companies to benefit as possible, we must aim to change global funds’ organisational structures and thereby managers’ behaviour.
Since the 1990s, a large proportion of world savings have gone to institutional investors that manage those assets by investing globally. This trend has driven a sharp increase in capital market activity and financial globalisation (cf. Obstfeld and Taylor 2004; Kose, Prasad, Rogoff and Wei 2009). Given this accumulation of resources in professional and sophisticated asset managers, you might expect to see significant international diversification accompanying this process, with many countries and companies benefiting from the influx of foreign capital.
assets, international finance, global funds, fund