DEER ISLE: Insights, Flows & Investment Trends

China Low-Rate Environment – Capital Flow Consequences

In March, we wrote in our Newsletter, that it seemed that the Chinese economy was weaker than expected and that China was one of the few major economies that was decreasing interest rates.  The world has caught up to this view and China’s poor economy is back in the news.

We are hearing that Chinese investors are moving their money into Western markets which is in contrast to a recent WSJ article that indicates Chinese investors are leaving Western markets. 

The Western/China interest rate differential has made it very attractive for Chinese investors to buy fixed income and credit instruments.  In addition, the relative economic outlooks make Western markets a longer term “buy” based upon the economic differential.

Capital Provider Interest – We have interest from Wealth Advisors for Credit based investments that yield 8% net.

Funds – Capital Interest is Turning from Credit to Basic Industry/Infrastructure: Follow the government money!  The US Government is investing Billions in these sectors and private investors can leverage the government investment.

Venture Capital – “Preparation” is the Name for Capital Success: Investments are still being made in Venture Companies but only when the investment proposition and path to returns are clear.

Sponsors – Has this Space Become Overcrowded? Sponsor transactions used to be unique and now business schools teach a course.  We are hearing from family business owners that they receive 2 to 5 calls a week from “sponsors” wanting to buy their businesses.