Foreign portfolio investment (FPI) consists of securities and other financial assets held by investors in another country. It does not provide the investor with direct ownership of a company’s assets and is relatively liquid depending on the volatility of the market. Along with foreign direct investment (FDI), FPI is one of the common ways to invest in an overseas economy. FDI and FPI are both important sources of funding for most economies.
With FPI—as with portfolio investment in general—an investor does not actively manage the investments or the companies that issue the investments. They do not have direct control over the assets or the businesses.
In contrast, foreign direct investment (FDI) lets an investor purchase a direct business interest in a foreign country. For example, say an investor based in New York City purchases a warehouse in Berlin to lease to a German company that needs space to expand its operations. The investor’s goal is to create a long-term income stream while helping the company increase its profits.
This FDI investor
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