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<\/p>\nIt\u2019s never been easier to invest in another country, but buyers need boots on ground in Europe, elsewhere to mitigate risks.<\/p>\n
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Daniel Shindleman is a bridge builder. As managing director of the aptly named Bridgemer AG, a Swiss firm that advises on and brokers real estate transactions, he often acts as a conduit for Canadian families, finding real estate and sustainable real assets such as infrastructure and agriculture to diversify their portfolios.<\/p>\n
It turns out Switzerland is one of the world\u2019s top partners for cross-border investing due to its political and societal stability, strong currency and robust real estate market. Shindleman says that Canadian clients he works with are often seeking opportunities outside Canada to leave a legacy or assets they will pass on to the next generation.<\/p>\n
What the Swiss investments offer them are exposure to another currency that isn\u2019t the ever-falling Canadian dollar, he says, plus a well-developed real estate market where there\u2019s solid protection of foreign ownership.<\/p>\n
\u201cDiversification is more than just having stocks, bonds, gold and cash\u2014it\u2019s taking those asset classes and, in particular, real estate and investing abroad,\u201d says Shindleman, who is originally from Winnipeg.<\/p>\n
Given the increasing sophistication of financial infrastructure globally, it\u2019s never been easier to invest in another country, says Gavin Reiff, vice president, real estate advisory, with Richter in Toronto.<\/p>\n
\u201cThe interconnection between financial firms, services firms and the interconnectivity of the global economy has made it easier and more available for money to cross borders from an investment perspective,\u201d he says.<\/p>\n
As a result, Canadian families, with the guidance of family office advisors, are increasingly looking to diversify their portfolios through international holdings. It\u2019s up to family offices to ensure they are aware of the tax implications, legal frameworks and cultural differences before making an international leap.<\/p>\n
Here are a few reasons for foreign investment among wealthy families:<\/p>\n
Family heritage:\u00a0<\/strong>Often families wish to invest in a specific country because of familial ties, says Shindleman. Germany is a popular option, he notes.<\/p>\n \u201cThey might have an ancestral connection to those countries, are thinking of the future\u2014maybe the children should learn German\u2014and decide to have the income from a nice property in Munich, where they don\u2019t have to worry about currency or availability,\u201d he says.<\/p>\n Expanding an international presence:\u00a0<\/strong>Families with strong international connections\u2014those with family members abroad or who are operating businesses outside Canada\u2014are more likely to seek a very international portfolio, says Toronto-based Ralph Awrey, director, family office, at Stonehage Fleming.<\/p>\n \u201cOften they already have a strong international connection, so they\u2019re operating businesses internationally, or they have a very international portfolio,\u201d he says.<\/p>\n Awrey says these families have an understanding of and comfort level with foreign markets. \u201cThey\u2019re able to continue the pursuit of that international diversification because they\u2019ve already got a solid grounding in it through their business activities,\u201d he says.<\/p>\n Passion projects<\/strong>. Sometimes the investments are personal interests, says Awrey. \u201cWe\u2019ve just helped a Canadian acquire a vineyard in South Africa\u2014it was something he\u2019d wanted all his life,\u201d he says.<\/p>\n So these kinds of investments are not always exclusively about investment diversification and capital allocation, he says. \u201cSometimes there\u2019s a mixed rationale.\u201d<\/p>\n Hedging opportunities.<\/strong>\u00a0Many of Shindleman\u2019s clients want to diversify into the Euro market but also want to cushion that exposure. \u201cWe will arrange a hedge for them\u2014we\u2019re talking about well-developed currency, so there\u2019s a very efficient hedging market,\u201d he says.<\/p>\n He acknowledges the hedging market for the Canadian dollar has become expensive over the past few years. \u201cThat\u2019s one of the reasons why maybe [a family] should consider taking some foreign currency exposure as part of its overall portfolio exposure and diversification,\u201d he says.<\/p>\n Creating a legacy<\/strong>. Philanthropy is often a driving force behind foreign investment. \u201cYou can also have real estate assets put in a philanthropic entity,\u201d says Shindleman.<\/p>\n Regardless of the reason for foreign investment, Reiff emphasizes the importance of local knowledge and partnerships. Families need specialized advice on the geographic locations they prefer, on the political climate, changing governments, declining values of currency and even climate-change impacts.<\/p>\n \u201cIt\u2019s challenging as an outsider,\u201d he says. \u201cIf you look at something on paper, it could make sense.\u201d But seeking an advisor who can partner with a Canadian family office who has expert knowledge of the jurisdiction is essential.<\/p>\nAsk the right questions before investing<\/h2>\n