Latin American Investors Look North to US Markets

With the recent global economic slowdown and European and Asian equity market weaknesses, foreign investors have been increasingly looking to the United States as a destination for investment dollars, recently eclipsing traditional offshore outposts such as Switzerland and the United Kingdom.

Now, a new report, Risk and Return in Latin America, suggests that wealthy Latin Americans may agree.

For Latin American investors facing economic challenges in their home countries, the US has an especially strong appeal. Further, Latin American interest in US investments may be poised for growth as the region’s wealthy explore new ways to preserve and grow assets.

In the first-ever survey of its kind, Morgan Stanley, in partnership with Campden Wealth, surveyed 45 ultra-high-net-worth (UHNW) Latin American family business executives. The results revealed that the respondents were more positive than North American investors about the outlook for the US and global economies. Based on recent study, of the $1.4 trillion invested into the US by wealthy foreign investors¹, a significant amount originates from Latin America. In fact, 29% of LatAm wealth booked offshore went to the US.² The Campden research indicates there is potential for even more.

“These executives are looking for places to house their wealth and to invest in both real assets, like real estate and businesses, as well as personal priorities, including higher education for their children, residency and potentially citizenship,” says James Jesse, head of Morgan Stanley’s International Wealth Management team. In Florida, for example, Latin Americans accounted for 56% of state’s international real estate buyers last year.³

The survey found that 58% of Latin American executives believe the US economy will improve over the next year, compared to 29% of US-based investors. Though the perspectives varied by country, optimism was strong: 78% of Brazilian executives have a favorable outlook for the US economy along with 66% of Mexican executives.

Indeed, while Americans may have waning confidence in their political system or be less than enthused about the country’ economic recovery, on a global scale the US is a relative haven of financial stability. “There are not just opportunities here, but also predictable processes and regulations that can help foreign investors bring their goals to fruition,” Jesse says.

More than 40% of the Latin American executives surveyed cited wealth preservation as their primary wealth management goal. That these investors feel vulnerable is expected, given many of the region’s economies are in their fifth year of decline. According to the International Monetary Fund, Latin America’s three largest economies—Argentina, Brazil, and Venezuela—contracted in 2015.

“These investors been more exposed to the global economic crisis, and they’re very focused on finding stable diversification for their wealth,” Jesse says. However, at the same time, a third of the respondents prioritized investment and business growth above all. While the economic situation in individual countries contributes to these dual objectives, many of the executives are indeed striving for seemingly contradictory aims: They need to protect their family’s wealth and take the risks necessary to grow their companies and portfolios.

Many see the potential for US investments to serve both aims, providing diversification that helps minimize risk while offering entrepreneurial and other investment opportunities. The US and Europe have major appeal for wealthy Latin Americans because of their “proximity, strong networks and ease of doing business, compared with other growth regions,” according to the Risk and Return in Latin America report.

Morgan Stanley recently intensified its commitment to the region, even as other firms have retreated. For example, Credit Suisse announced that it was winding down its private US banking operations that serve Latin Americans, as its smaller presence hampered the bank’s competitiveness.⁴

Navigating the Latin American market requires a high-level of skills and experience as well as a commitment and familiarity with the region, Jesse says. With 12 offices dedicated to LatAm investors and 435 Financial Advisors—including 75 new hires—Morgan Stanley offers all three criteria.

The Firm’s 30-year presence in the region includes providing investment banking services, fixed income, foreign exchange and commodities trading in addition to brokerage and cash management services. John Moore, Morgan Stanley’s chairman for the Latin American business, says the complementary partnership between institutional side of the Firm and wealth management works to the clients’ advantage, especially those in search of US opportunities.

“In Latin America, relationships drive business,” he says. “That we can personally connect clients to institutional services in addition to investment opportunities in the region and abroad allows us to deepen our relationships there even more.”