Real asset investors could unlock opportunities in these uncertain times

Prospects for foreign direct investment (FDI) continue to look uncertain after a volatile few years. The FDI market is facing unprecedented challenges that demand strategic navigation.

Real asset investors, with their unique capabilities, can be key players in overcoming these obstacles and steering the FDI ship through turbulent waters.

Several factors are contributing to the complexity of the FDI market today. Geopolitical tensions, trade disputes and the aftermath of the pandemic have created an environment of ambiguity, making traditional investment decisions more challenging. The increasing focus on ESG factors is also changing calculations, prompting investors to re-evaluate risk-and-return equations.

In these complex times, real asset investors are perhaps uniquely positioned to tackle the uncertainties and capitalise on opportunities. Real assets provide tangible and long-term investment prospects that can weather economic storms and foster sustainable development. There are several avenues where they can be of particular help:

Infrastructure Investments

Real asset investors can play a crucial role in addressing the global infrastructure gap. Investments in essential infrastructure projects, such as transport, energy and telecommunications, not only promise steady returns, but also contribute to economic development and resilience.

Real Estate Opportunities

Amid economic turbulence, real estate can provide stable returns and act as a hedge against inflation. Real asset investors, armed with a keen understanding of local markets and regulations, can identify real estate opportunities in foreign markets and help drive economic growth.

Navigating Regulatory Complexities

Real asset investors often possess a deep understanding of regulatory landscapes and are adept at navigating complex legal frameworks. This expertise is invaluable in the face of increasing regulatory scrutiny on foreign investments, enabling investors to identify compliant strategies and mitigate risks.

ESG Integration

Growing emphasis on ESG aligns with the principles of real asset investing. By incorporating environmental and social responsibility into their strategies, real asset investors can not only meet evolving investor expectations, but contribute to sustainable and responsible global development.

The rise of international project finance (IPF) illustrates the evolving nature of FDI, as well as the growing relevance of financial investors, offering a dynamic mechanism that transcends borders and traditional investment models. Amid declines in FDI flows globally, the number of IPF deals increased 8% in 2022 (the most recent year for which there are full-year figures), according to the UN Conference on Trade and Development.

IPF has emerged as a strategic avenue for channelling FDI into complex, large-scale ventures. Unlike conventional investment structures, project finance enables investors to participate in high-impact initiatives such as infrastructure, energy, and industrial projects.

This approach mitigates risks by segregating project assets and liabilities from the balance sheet, attracting a diverse range of investors keen to navigate complex, cross-border ventures. As countries seek innovative solutions to fill infrastructure gaps and stimulate economic growth, IPF will have a growing role to play.

As the world navigates uncertain times, the role of real asset investors is more important than ever in shaping the future of FDI. It is therefore critically important that FDI agencies get to know these investors, and vice versa. This is core to our mission at Real Asset Media, via our new Real FDI platform, so stay tuned as these essential connections continue to be made across both the FDI and real asset communities.

Courtney Fingar is the founding partner of Fingar Direct Investment and a contributing editor to Real Asset Insight.