Russia’s rich move money out
In 2008 Russia’s rich almost doubled their transfers abroad compared to the previous year with overall investment into foreign economies totaling $25.6 billion.
Wealthy Russians are taking money out of the country and placing it in what they believe are safer havens like real estate. Andrey Rozhkov, an analyst at CIG, says the current economic crisis is making Russians look for a better place to invest.
“Russians, who are worried about keeping their savings have found an alternative to the Russian economy, abroad. They are placing their money on the financial markets and into real estate. The increase is because of the crisis, as there are fewer assets into which you can invest now in Russia.”
Transfers were also used to pay for goods and services, or sent to far off relatives and the proportion of money used to purchase real estate doubled- from 4 % to 7 % in 2008.
However, CEO of Citgroup’s global transaction services, Francesco Vanni D’archirafi, says it’s a reasonable thing to diversify assets among different countries.
‘Diversification is very important for a good risk return profile for your investment portfolio, and diversification is not only across industry sectors, but also geographical diversification.”
$8.5 Billion dollars were put into foreign banks in countries like the Netherlands, Luxembourg, Switzerland and Monaco. While some pessimistic forecasts suggest money is leaving the country because Russians don’t trust in its ability to recover from the crisis, Francesco Vanni D’archirafi disagrees.
“I know Russians understand the potential of this country and I am sure they’re willing to invest in the future of this country so I don’t think that’s the cause.”
Time will tell if investors have made the right decision.