Investment firms turn to offshore
Liberty launches a global portfolio that will give investors exposure to companies in the US’s S&P 500 and European Euro Stoxx 50
As the JSE continues to decline and SA’s growth forecast has been revised downwards in every recent budget speech, investment companies are increasingly looking offshore to deliver returns to their customers. The JSE is down 14% so far in 2018. Liberty launched a global portfolio on Tuesday that will give investors exposure to companies in the US’s S&P 500 and European Euro Stoxx 50.
As the JSE continues to decline and SA’s growth forecast has been revised downward in every recent budget speech, investment companies are increasingly looking offshore to deliver returns to their customers. The JSE is down 14% so far in 2018.
Liberty launched a global portfolio on Tuesday that will give investors exposure to companies in the US’s S&P 500 and European Euro Stoxx 50. The insurer has a traditional global portfolio but it is the first time since before the global financial crisis that it is offering investors exposure to other asset classes.
“When it comes to products that gave our clients exposure to offshore markets, we tended to get in at a wrong time …. We are getting back into the space by taking alternative-type investments,” said Liberty’s director for the investment propositions division, Vimal Chagan.
He said the single-digit returns delivered by the JSE in the past five years have increased investors’ appetite for something different.
“It’s been very difficult for investors to reach their financial goals … so what we can do in the investment space is do something a bit different,” he said.
Chagan said they looked at Europe and the US particularly because the S&P 500 had risen 50% over the past five years and while the Euro Stoxx 50 was more volatile, it offers investors a chance to put their money in asset classes that are beyond the traditional mix of bonds, equities and cash.
Liberty is guaranteeing the capital of investors if market returns are negative and will offer a minimum return of 10% if returns are positive. But investors have to stick it out for five years to get these benefits.
Natalie Phillips, head of SA institutional at Investec Asset Management, said global markets offer SA investors more “investable” options, as the MSCI equity alone has more than 2,500 liquid shares to invest in. “In SA, your investable universe is about a hundred if you are lucky,” she said.
Investec has started an investment office in China, where it offers an All China Equity fund.
Phillips said Investec has always maintained that diversifying through offshore assets is the way to go.
With regulation 28 now allowing SA investors to put up to 30% of their money in offshore markets outside Africa, offshore diversification will become mainstream.
“In 2000, R56bn was deployed offshore by SA investors and today it’s around R516bn. The trend is massive and it’s going to continue because you have the ability to participate in fantastic investment themes globally …
“You can invest in sectors and subsectors that are not prevalent in the SA market, like fintech, artificial intelligence and other disruptors,” she said.
However, unlike Liberty, Investec is cautious about the US and holds a cash position instead of investing heavily in US equity. Phillips said they are concerned that the multiyear bull run might not be sustained.
Xhanti Payi, an economist and founding director of Nascence Advisory and Research, said while the markets are not too great offshore, they offer more sweet spots for SA investors given indicators such as low inflation, low unemployment and higher growth.