The world of finance is changing. New actors have emerged and now play an important role in supporting global growth – chief among them are institutional investors such as pension funds, insurance companies, sovereign wealth funds and asset managers.
The market opportunities and challenges that these investors face were at the core of the discussion of the capital markets panel at the EBRD Annual Meeting and Business Forum 2014 in Warsaw.
As banks continue to face severe capital constraints in the aftermath of the financial crisis, there is an urgent need to fill this gap. With an estimated US$ 70 trillion in assets, institutional investors are much sought after as unique providers of both debt and equity finance in these challenging times.
The market has grown in recent years, but investors have a choice to allocate their assets around the globe. And they are looking for a stable, predictable and transparent environment, especially when it comes to long-term investments, the panellists stressed during the debate.
They are also looking for a stable local capital market, pointed out Deborah Zurkow, CIO and Head of Infrastructure Debt, Allianz Global Investors. “Project risks, in combination with local currency risks, all too often still deter institutional investors from increasing their activities in transition countries.”
This is the reason why the EBRD actively supports local capital markets in its countries of operations in various ways – for example through its Local Currency and Capital Markets Initiative.
Does this mean that banks will play a less important role in central Europe, and more broadly in transition economies, in the future?
“Commercial banks are still committed to the region,” said Klemens Breuer, Member of the Management Board, Raiffeisen Bank International AG. “There is a good opportunity for developing markets to attract investors in general simply because the yield is high.”
Many banks have developed a strategic focus on regional economies and financial expertise in local markets, he added. This is a shift from their previous approach to spread investments more broadly around the globe.
While institutional investors are increasingly important in providing much-needed finance, their role is not to replace but rather to complement the work of other lenders, panellists stressed.
“The markets in the EBRD’s region offer very good investment potential,” said Manfred Schepers, EBRD Vice President and Chief Financial Officer. “The crisis has illustrated how important it is that these developing economies not only attract international institutional investors but also foster the development of their own investor bases.”
Thursday 15 May, 11.30-13.00
- Ralph Atkins, @RalphAtkins, Capital Markets Editor, Financial Times Ltd.
- Klemens Breuer, Member of the Management Board, Raiffeisen Bank International AG
- Gianni Franco Papa, Head of CEE Division, UniCredit
- Manfred Schepers, Vice President and CFO, EBRD
- Paweł Tamborski, Under-Secretary of State, Ministry of the Treasury, Poland
- Danny Truell, CIO, The Wellcome Trust
- Deborah Zurkow, CIO and Head of Infrastructure Debt, Allianz Global Investors