Invest offshore ‘for the right reasons’


South Africans tend to flock offshore in response to rand weakness or negative news headlines.

This is counterintuitive, costly and can destroy value.

The decision to go offshore should be made for the right reasons, and it should form part of your long-term investment plan. The ‘right’ reason for investing offshore includes the need to diversify your portfolio and broaden your exposure.

The JSE accounts for just over 1% of the world’s markets, and only 6% of emerging markets. Furthermore, there are major business sectors like technology that simply cannot be accessed locally.

How to invest offshore

Domestic investors do have a percentage of their portfolio effectively earning offshore revenue through exposure to top JSE-listed companies, with approximately half of the earnings of the Top 40 listed companies in South Africa (representing more than 80% of the market) generated outside of South Africa’s borders.

However, for investors wanting direct access to the full global listed equity universe that is not available on the JSE, and to earn returns in foreign currency, there are three main routes to investing offshore: through a local unit trust that is mandated to invest a portion of its assets offshore, through a rand-denominated unit trust that invests entirely offshore or via a mutual fund through an offshore provider.

Many local unit trusts, such as your typical balanced funds that must comply with retirement fund regulations, can invest up to 25% of their assets offshore. How much offshore exposure you get in these unit trusts depends on the asset manager’s view at the time.

If you are looking for additional offshore exposure, the simplest choice is to invest in a rand-denominated unit trust. These are offered by a locally based asset manager, who offer ‘feeder funds’ directly linked to an offshore unit trust.  You invest and withdraw in rands, but your investment is into foreign companies.

The other route is to invest in foreign currency, either directly with an offshore provider, or through an offshore investment platform. The attraction of this option is that you are invested in foreign currency. While going this route is a bit more admin-intensive, it is not difficult.


All these choices must be made in the context of your financial plan.

Investing offshore should never be a kneejerk reaction to events, but rather a decision taken as part of an overall financial plan.

Your personal circumstances and risk tolerance should govern how much of your portfolio you should take offshore and into which asset class. Seek advice from a reputable financial adviser to help you navigate the greater complexity that inevitably arises from the huge number of funds available globally. It can otherwise be overwhelming.

Long-term view

Investors should balance the benefits of diversification with their own investment objectives and time horizon.

We caution investors against focusing excessively on the short term as this could cloud judgement and see investors making decisions that may ultimately destroy the value of their investments.

One way to help ride out short-term volatility is to adopt a long-term view and choose an investment manager you trust and who has experience and a proven track record. Then stick with your investment strategy consistently over the long term.

Tamryn Lamb | Head of client servicing: South Africa | Orbis: Offshore Partner to Allan Gray |  | |




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