Missing assets: Exploring the source of data gaps in global cross-border holdings of portfolio equity

Estimates of cross-border portfolio equity liabilities are substantially larger than the corresponding cross-border claims (some $4 trillion in 2021, about 4 percent of world GDP). Resolving this discrepancy would strengthen the understanding of the cross-border implications of changes in asset prices, an important element in maintaining financial stability, and would shed light on whether unreported assets are properly covered by domestic tax systems. We show that the equity discrepancy arises primarily from equity holdings in Ireland, Luxembourg, and the United States whose ownership is not reflected in partner countries’ positions. Using data from these countries’ surveys of portfolio liabilities and the IMF’s Coordinated Portfolio Investment Survey, we show that an important share of unidentified equity holdings (close to $3 trillion in 2021) reflects transactions through intermediaries based in the United Kingdom. This likely reflects some underestimation of UK portfolio equity holdings as well as holdings of foreign equity on behalf of nonresident investors not captured by their countries’ statistics. Reducing data gaps would require stronger data collection in financial centers, including provision of information on securities’ holdings through domestic custodians also for cases where neither the issuer nor the ultimate holder of the security is a resident of the country.