Portfolio investment

 

Portfolio Investment (PI) are cross-border security transactions (only if the stake is not more than 10%; otherwise it is classified as Foreign Direct Investment (FDI)). In this context, the investor is interested in the securities’ profit, as opposed to FDI, which focus on a strategic perspective. Cross-border transactions of securities are illustrated in the Balance of Payments (BoP). The stock of foreign securities acquired by domestic holders or domestic securities acquired by holders abroad is illustrated in the International Investment Position (IIP). Securities recorded as PI are rated at market values.

In the BoP and IIP, a distinction is made between assets and liabilities of portfolio investments:

  • PI-Assets: Foreign securities acquired by domestic holders.
  • PI-Liabilities: Domestic securities acquired by holders abroad.

Domestic securities are defined as securities with a domestic issuer. Foreign securities are defined as securities with a foreign issuer. Thus, the classification is not determined by the country of the security issuance and it is independent of the security’s currency.

There are two types of securities (financial instruments):

  • Equity securities, divided into listed/unlisted shares and investment fund shares.
  • Debt securities, categorized as short-term debt securities (with an original maturity of up to one year) and long-term debt securities (with an original maturity of one year or more). Securities held by the central bank as reserve assets are not classified as Portfolio Investment but Reserve Assets. 

Cross-border income on Portfolio Investment is displayed in the same structure within the BoP, categorized as investment income in the current accounts.

Securitised financial derivatives in the BoP and IIP are not classified as Portfolio Investment but as Financial Derivatives.

The data of Portfolio Investment are structured by region and sectors in order to answer following questions:

  • In which countries do Austrian residents invest in securities?
  • Which domestic economic sectors invest in foreign securities (Portfolio Investment assets)?
  • Which domestic economic sectors refinance themselves abroad (Portfolio Investment liabilities)?