US investors have access to only 10 per cent of stocks that are internationally traded according to the latest report published by Broadridge Financial Solutions – Global Investing: Considerations for Building an End-to-End Solution.
The report cites that 90 per cent of US investable assets are not invested in international markets where growth over the past 10 years has been the strongest. Financial institutions can capitalise on outperforming international markets by offering their clients access to a broader array of investment opportunities beyond the US market to foreign and emerging economies.
"Offering access to direct global investing provides a significant growth opportunity for financial institutions," says Joseph Barra, President, International Securities Processing and Global Outsourcing, Broadridge. "With emerging markets anticipated to grow faster than developed economies over the next five years, financial institutions from brokerage firms to wealth management funds have a time-sensitive window of opportunity to enhance their technology and operations to create global investing platforms."
To date, investors have utilised American Depositary Receipts (ADRs) on US stock indexes and more recently Exchange Traded Funds (ETFs) to gain access to global markets. But the choice of ADRs is usually limited to large cap companies in more developed countries. Of the approximately 50,000 stocks available for purchase in world markets, fewer than 1 in 10 are traded on US exchanges.
This gap provides an opportunity for financial institutions to meet the increasing demand for ownership of foreign securities, particularly among active investors and high net worth individuals.
"Investment opportunities are shifting to the rapidly growing markets in emerging and developing countries and investors looking to capitalise on this growth require direct access for better returns," says Barra. "Our clients are continuing to look for differentiating, cost effective solutions to grow their businesses, and Broadridge provides financial institutions an end-to-end technology and outsourcing solution to access these foreign investments, giving them a significant edge."