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American Money Is Moving Abroad

Euro

As U.S. investment overseas surged last year by 7.6 percent, with most of it going to Europe, the biggest single chunk went to Switzerland, where the attraction is a Alps vacation from the volatility of the rest of the market.

For 2017, $63 billion in American investment money went to Switzerland, which now enjoys a total of $250 billion in U.S. money, not counting cash deposited in Swiss bank accounts.

(Click to enlarge)

Source: BEA

Oliver Hohermuth, heads the Dallas office of Swiss investment adviser Reyl Overseas, told CNN that Switzerland has been “rediscovered by Americans” as a “good way to diversity, and to be a little bit more segregated from the high volatility that we’ve seen in the US market in the past few years”.

Further, said Hohermuth, the rapid expansion of Swiss industrial companies in emerging markets has proved to be an attractive investment vehicle for wealthy Americans. But perhaps more importantly, the taint of Switzerland has subsided thanks to the 2010 FCPA (Foreign Corrupt Practices Act), which has injected more transparency in the venue and made some Americans more comfortable putting money there.

In other words, it’s not about hiding money today as much as it is about investing.

And Switzerland wasn’t the only European country to see an uptick in U.S. investment money last year.

Overall, the cumulative level of U.S. direct investment abroad increased by $427.3 billion in 2017, topping over $6 trillion, up from around $5.6 trillion the previous year, according to the Bureau of Economic Analysis (BEA). Related: Tesla To Build $5 Billion Plant In China

“The increase mainly reflected a $243.6 billion increase in the position in Europe, primarily in Switzerland, the United Kingdom, Ireland, and the Netherlands. By industry, affiliates in manufacturing and holding companies accounted for the largest increases,” BEA said.

(Click to enlarge)

From the U.S. overseas investment standpoint, it was interesting to note that five countries accounted for more than half the total U.S. investment total at the end of last year, and the Netherlands saw the biggest share, taking in $936.7 billion. Second place went to the UK, with $747.6 billion in U.S. money, followed by Luxembourg with $676.4 billion, Ireland with $446.4 billion and Canada with $391.2 billion.

From the industry perspective of the immediate foreign affiliate, nearly half of those combined totals were in holding companies, according to BEA. At the same time, when looking at the numbers by the industry of the U.S. parent companies, manufacturing accounted for more than half of the total position, followed by finance and insurance, with much smaller shares.

Related: Is There A Correlation Between Gold And The Yuan?

On the flip side, foreign direct investment (FDI) in the U.S. also saw a similar increase, adding $260.4 billion in 2017, hitting over $4 trillion—up from just under $3.8 trillion in 2016. Again, it was Europe that led the push on this, with Ireland, Switzerland and the Netherlands in the top positions, and manufacturing and wholesale trade accounting for the biggest industry increases.

The UK topped the list of ultimate beneficial owners (UBOs) in the U.S., with British UBOs holding a $614.9-billion in the U.S., followed by Canadian UBOs with $523.8 billion, Japanese with $476.9 billion, Germans with $405.6l billion and citizens of Ireland with $328.7 billion.

But what the UBO numbers showed the BEA is that much of the investment from the Netherlands and Luxembourg was ultimately owned by investors in other countries.

By Michael Scott for Safehaven.com

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