Polish HNW investors doubled their offshore allocations between 2012 and 2015. With historically low interest rates and an uneasy local stock market, they are turning their attention to foreign markets with more investment options.
As an emerging economy, Poland has a growing (but still very small) population of HNW individuals: they account for only 0.06% of the total adult population. Yet at the same time they hold more than a quarter of Poland’s liquid wealth and expect their private bankers to come up with attractive investment ideas. The real estate market has long been considered a good alternative to other asset classes, but property investments are not enough anymore.
Hence Polish HNW investors are showing increasing interest in allocating assets abroad. Already 24% of their assets are held offshore, and while tax efficiency remains an important reason for offshore investments, it is not the top driver. Markets such as Germany and the US offer access to a greater range of products (such as ETFs) than Poland, and the wealthiest Polish individuals want to take advantage of options available there.
This tendency to invest money abroad is unlikely to change soon. Low interest rates limit the attractiveness of deposits and debt securities. Polish banks are going through turbulent times (including a new tax regime, cooperative banks’ defaults, and potential legislation around legacy foreign currency mortgages) and concerns about their profitability are taking a heavy toll on the already underperforming Polish stock market. No wonder HNW investors hope for better returns offshore.
By Bartosz Golba, Interim Head of Wealth Management