The world of wealth is shifting from North America to Asia-Pacific, which means fund managers need to pivot towards international investors if they want to grow their portfolios.
The latest World Wealth Report shows Asia-Pacific passed North America as the region with the largest group of high net worth individuals. The report credits the expansion of emerging economies for the rapid expansion of wealth overseas.
During my time as Managing Director with Genesis Securities and Lek Securities in New York, I had to navigate this international terrain in search of institutional investors. It wasn’t easy, but along the way, I learned a few business tactics that can help other fund managers reach international investors.
Here’s a breakdown of how I located and identified these elusive investors for potential business deals.
1. Identify Local Banks and Hook Them with Incentives – The local bank in every country is the crucial connector with high asset holders. Any fund or business pursuing international investors must establish relationships with account managers and appeal to their self-interest by explaining how this new deal will make them more profitable.
Many foreign markets have underdeveloped financial services, and the services tend to be offered by one type of institution – the bank. Most foreign investors have local business interests and are actively involved with their bankers. Thus, bankers have access to elusive high-net-worth investors, have working financial relationships with them, and are a perfect conduit for selling your investment or making introductions.
However, in the banker’s mind, a dollar invested outside of the bank is a dollar not deposited. Thus, it is important to incentivize the bank by convincing them that for every dollar their clients invest with you, the bank will make more money than it would if investors kept their assets in the bank.
Identify the spread between deposit and lending rates for a particular country. The smaller the spread, the less of an incentive the bank will need to introduce their clients to you. Countries with very low or even negative interest rates may be attractive.
2. Create a Roadshow or Seminar – This is typically where the deal falls apart because of cultural nuances and an information gap. For example, a business plan for a restaurant that compensates workers through gratuities is easily understandable in the U.S. In Japan, where tipping is uncustomary and impolite, it might need further elaboration.
Ensure that your presentations are in both English and the local language. You need to scrutinize the local translation more than the polished English one. Hire independent and separate editors and translators to recheck your editors’ and translators’ work.
Also, think of local analogies to your business. Don’t think about the products, but the principles involved. For example, when selling a fund that is trading carbon futures on an exchange, analogize to trading deep-sea fishing permits at industry meetings in maritime countries.
3. Establish Credibility – Investor’s care about your address and it impresses them when they recognize a name like Wall Street. Famous areas and buildings carry a lot of weight with international investors.
Information on trends takes a long time to permeate international boundaries. The next hot area in Brooklyn may be very prestigious and signal innovation to the insiders in New York, but investors in Dubai will not be impressed.
When investors look at a financial firm and do not see a Wall Street address, their impression of the reputability of the firm will immediately drop. Luckily, U.S. streets and landmarks are among the most well known worldwide and with the inexpensive availability of office sharing, address sharing, and other tools that provide a recognizable address, there is no need to relocate operations.
4. Form Alliances – Chambers of commerce, professional associations, and industry groups all share one trait – their members are business leaders. Partnering with these organizations will provide access to their members and interacting with them through an allied organization plants the seeds of trustworthiness.
For targeting investors in emerging economies, NGOs are your friends. They tend to know which players are large in each industry and what they are interested in. They have networks in many countries as well. An NGO trying to improve infrastructure in Sudan may bring investors from France. Funds or firms should specifically look for NGOs with a strong presence and long history in the country they are targeting.
5. Industry Specific – Most firms looking for international investors search too broadly, targeting people with the most money. If you are a real estate agency looking for international investors for development projects, target international law firms who are struggling to provide options for their clients. Likewise, hedge fund managers should target admins.
There is a dramatic amount of opportunity in emerging markets. It’s natural that firms are searching for investors overseas, but that brings new challenges. However, if there is a thoughtful plan in place and these investors are strategically targeted, they are absolutely attainable.
Opinion column by Serge Pustelnik. He is currently studying international law at Harvard and is also a legal fellow at New Markets Lab in Washington