How Patient are Institutional Investors from Emerging Economies?
& Edo Aalbers
Published: September 2012
The global economy faces huge investment needs in infrastructure and other areas requiring patient capital. The public sector is unlikely to meet such needs as unsustainable debt levels demand deep fiscal adjustment measures. At the same time, there is growing concern that private long-term investors in advanced economies, such as pension funds and life insurers, might be unable to provide the necessary capital as they continue to de-risk their portfolios and become subject to more stringent regulation. Against this background, this paper assesses the potential role of new investors in emerging economies as suppliers of patient capital. The paper concludes that continued social security reforms and the dismantling of investment restrictions should allow pension funds and insurance companies in emerging markets, in concert with sovereign wealth funds, to help narrow the gap that is feared to emerge due to the more constrained supply of capital from traditional investors.