More investors look offshore - Old Mutual unit
WAYNE Sorour, the head of Old Mutual International South Africa, said yesterday in an interview with Business Report that high-net-worth South African Investors were increasingly taking advantage of their R10million allowance to invest offshore as a means of mitigating the risk of over-concentrating assets domestically.
Sorour said while diversification of assets was the main strategic reason for offshore investment, the lure of varied options and ability to hedge against the volatility of the rand were strong incentives.
“For instance, if investors wanted to invest in the pharmaceutical sector on the FTSE/JSE, the options are limited to just Aspen, Ascendis and Adcock Ingram. However within the global market there is a selection of over 60 pharmaceutical companies, and that’s just on the London Stock Exchange,” Sorour said.
The SA Reserve Bank has measures in place to limit the amount of money individuals can invest abroad. One condition is that an adult taxpayer in good standing may invest R10m in his or her name outside the common monetary areas of Lesotho, Swaziland and Namibia, per calendar year.
In addition, up to R1m, within the single discretionary allowance facility, may be transferred abroad.
Maarten Ackerman, an investment strategist at Citadel, said offshore investment provided investors with more industries, companies and diversification opportunities.
“It is attractive because it provides currency diversification into less volatile hard currency and away from possible rand weakness and better growth dynamics given other faster growing markets. Given the current valuations, it offers better growth and earnings potential and lower valuations compared to local stocks,” Ackerman said.
Sorour said investors must not just focus on maximising returns, as tax implications and estate planning must be factored into the ultimate decision to invest abroad. “All these factors can impact the ultimate success of an investment, for example if an investor with offshore were to pass away, there may be consequences of not having an offshore will.”
He said with regard to returns, foreign equities were attractively priced compared with bonds and cash. It was critical for investors to source qualified, independent financial advisers before making any offshore investment.
Ackerman said offshore equities produced diversified returns and provided a cushion needed by investors.