what is foreign portfolio investment fpi 
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 understanding foreign portfolio investment fpi portfolio investment involves the making and holding of a hands off or passive investment of securities done with the expectation of earning a return in foreign portfolio investment these securities can include stocks american depositary receipts adrs or global depositary receipts of companies headquartered outside the investor s nation holding also includes bonds or other debt issued by these companies or foreign governments mutual funds or exchange traded funds etfs that invest in assets abroad or overseas an individual investor interested in opportunities outside their own country is most likely to invest through an fpi on a more macro level foreign portfolio investment is part of a country s capital account and shown on its balance of payments bop the bop measures the amount of money flowing from one country to other countries over one monetary year fpi vs foreign direct investment fdi 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 controls their monetary investments and often actively manages the company into which they put money the investor helps to build the business and waits to see their return on investment roi however because the investor s money is tied up in a company they face less liquidity and more risk when trying to sell this interest the investor also faces currency exchange risk which may decrease the value of the investment when converted from the country s currency to the home currency or u s dollars an additional risk is with political risk which may make the foreign economy and his investment shaky feasible for retail investorsquicker return on investmenthighly liquidno direct control management of investmentsvolatilecause of economic disruption if withdrawn although some of these risks affect foreign portfolio investments as well it is to a lesser degree than with foreign direct investments since the fpi investments are financial assets not the property or a direct stake in a company they are inherently more marketable so fpi is more liquid than fdi and offers the investor a chance for a quicker return on his money or a quicker exit however as with most investments offering a short term horizon fpi assets can suffer from volatility fpi money often departs the country of investment whenever there is uncertainty or negative news in a foreign land which can further aggravate economic problems there foreign portfolio investments are more suited to the average retail investor while fdi is more the province of institutional investors ultra high net worth individuals and companies however these large investors may also use foreign portfolio investments example of foreign portfolio investment fpi the year 2018 was a good one for india in terms of fpi more than 600 new investment funds registered with the securities and exchange board of india sebi bringing the total to 9 246 an easier regulatory climate and a strong performance by indian equities over the last few years were among the factors sparking foreign investors interest 