It’s never been easier to invest in another country, but buyers need boots on ground in Europe, elsewhere to mitigate risks.

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.  

It turns out Switzerland is one of the world’s 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.

What the Swiss investments offer them are exposure to another currency that isn’t the ever-falling Canadian dollar, he says, plus a well-developed real estate market where there’s solid protection of foreign ownership.

“Diversification is more than just having stocks, bonds, gold and cash—it’s taking those asset classes and, in particular, real estate and investing abroad,” says Shindleman, who is originally from Winnipeg.   

Given the increasing sophistication of financial infrastructure globally, it’s never been easier to invest in another country, says Gavin Reiff, vice president, real estate advisory, with Richter in Toronto.

“The 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,” he says.

As a result, Canadian families, with the guidance of family office advisors, are increasingly looking to diversify their portfolios through international holdings. It’s up to family offices to ensure they are aware of the tax implications, legal frameworks and cultural differences before making an international leap.

Here are a few reasons for foreign investment among wealthy families:   

Family heritage: Often families wish to invest in a specific country because of familial ties, says Shindleman. Germany is a popular option, he notes.

“They might have an ancestral connection to those countries, are thinking of the future—maybe the children should learn German—and decide to have the income from a nice property in Munich, where they don’t have to worry about currency or availability,” he says.

Expanding an international presence: Families with strong international connections—those with family members abroad or who are operating businesses outside Canada—are more likely to seek a very international portfolio, says Toronto-based Ralph Awrey, director, family office, at Stonehage Fleming.

“Often they already have a strong international connection, so they’re operating businesses internationally, or they have a very international portfolio,” he says.

Awrey says these families have an understanding of and comfort level with foreign markets. “They’re able to continue the pursuit of that international diversification because they’ve already got a solid grounding in it through their business activities,” he says.

Passion projects. Sometimes the investments are personal interests, says Awrey. “We’ve just helped a Canadian acquire a vineyard in South Africa—it was something he’d wanted all his life,” he says.

So these kinds of investments are not always exclusively about investment diversification and capital allocation, he says. “Sometimes there’s a mixed rationale.”

Hedging opportunities. Many of Shindleman’s clients want to diversify into the Euro market but also want to cushion that exposure. “We will arrange a hedge for them—we’re talking about well-developed currency, so there’s a very efficient hedging market,” he says.

He acknowledges the hedging market for the Canadian dollar has become expensive over the past few years. “That’s one of the reasons why maybe [a family] should consider taking some foreign currency exposure as part of its overall portfolio exposure and diversification,” he says.

Creating a legacy. Philanthropy is often a driving force behind foreign investment. “You can also have real estate assets put in a philanthropic entity,” says Shindleman.

Ask the right questions before investing

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.

“It’s challenging as an outsider,” he says. “If you look at something on paper, it could make sense.” But seeking an advisor who can partner with a Canadian family office who has expert knowledge of the jurisdiction is essential.