CityPress - - Business -

Most fund man­agers spent the past five years rec­om­mend­ing that in­vestors al­lo­cate a por­tion of their in­vest­ment wealth off­shore, but it was only when for­mer fi­nance min­is­ter Nh­lanhla Nene was fired in Novem­ber and the rand col­lapsed overnight that many made the de­ci­sion to trans­fer some money off­shore in what can mostly be de­scribed as blind panic.

This knee­jerk re­ac­tion to bad news un­for­tu­nately cre­ated a mis­per­cep­tion of the rea­sons one should in­vest abroad at all. It is not a pes­simist’s de­ci­sion; it is part of di­ver­si­fied wealth cre­ation.

Dug­gan Matthews, in­vest­ment pro­fes­sional at Mar­riott As­set Man­age­ment, makes the ar­gu­ment that South Africa makes up less than 0.5% of global stock mar­kets and, as res­i­dents, we are al­ready heav­ily ex­posed to South African as­sets and cur­rency through our life­style as­sets, pen­sion funds and in­come.

In­vest­ing off­shore pro­vides South Africans with ac­cess to sta­ble global brands, es­pe­cially if the port­fo­lio is geared to­wards house­hold names such as Col­gate, Nestlé and Coca-Cola.

Mar­riott re­cently launched its in­ter­na­tional in­vest­ment port­fo­lio, which fo­cuses only on qual­ity, sta­ble com­pa­nies that are geared to ben­e­fit from the rise of the middle class in emerg­ing mar­kets.

The aim of the fund is to pro­vide South Africans with di­rect share ex­po­sure to house­hold names that pro­vide a de­cent div­i­dend in­come at a low price.

Mar­riott has a clear in­vest­ment phi­los­o­phy, namely se­cu­ri­ties that pro­duce re­li­able in­come streams that grow above in­fla­tion pur­chased at a rea­son­able price.

This means that it sticks to qual­ity stocks that pro­vide an at­trac­tive div­i­dend yield and, over time, the div­i­dend yield pro­vides in­vestors with an in­come, re­mov­ing much of the stress as­so­ci­ated with buy­ing in the hope of shorter-term share price in­creases.

Matthews uses Col­gate as an ex­am­ple of an in­ter­na­tional com­pany that is well po­si­tioned to grow from an in­creas­ing middle class. Al­though it’s a com­pany listed in the US, Col­gate has mar­ket dom­i­na­tion in emerg­ing mar­kets such as South Africa, Mex­ico, In­dia and China.

“The es­ti­ma­tions are that, glob­ally, the middle class will grow from 2 bil­lion to 5 bil­lion peo­ple by 2030 and all th­ese peo­ple need to brush their teeth,” he says.

Not only should Col­gate’s share price rise over time, but it is cur­rently on a div­i­dend yield of 3.3% in dol­lars, which is dou­ble what you would earn from cash dol­lars or even US bonds. In the past 50 years, Col­gate has in­creased its div­i­dend pay­ments ev­ery year and there is no rea­son it will not con­tinue to do so.

“We like com­pa­nies that make ev­ery­day con­sumer ne­ces­si­ties, are hugely pre­dictable and have dis­tri­bu­tion net­works glob­ally that are well po­si­tioned to take ad­van­tage of the eco­nomic op­por­tu­nity in the rise of the middle class in emerg­ing mar­kets,” says Matthews, whose port­fo­lio does not in­vest in the more volatile and un­pre­dictable sec­tors such as min­ing or com­modi­ties.

Should you still take your money off­shore at R16 to the dol­lar?

“Peo­ple still re­mem­ber the rand trad­ing at R7 to the dol­lar and they think it could go back to those lev­els. A year ago, peo­ple did not want to take their money off­shore at R12 to the dol­lar. Now, most are wish­ing they had,” says Matthews, who adds that an in­vestor needs to look at the big­ger pic­ture rather than try to find the per­fect time to in­vest.

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