GREAT OP­POR­TU­NI­TIES BUT BE CARE­FUL

Financial Mail - Investors Monthly - - Feature: Global Investing -

There is some com­fort for SA in­vestors wish­ing to in­vest off­shore, writes Jo­hann

Barnard , in the knowl­edge that the routes to achiev­ing that goal have grown in tan­dem with the de­cline in forex re­stric­tions, With the an­nual for­eign in­vest­ment al­lowance set at R10m, the scope for tak­ing money abroad to in­vest is con­sid­er­able.

It is ob­vi­ously wise to speak to a fi­nan­cial ad­viser, and a tax con­sul­tant, to de­ter­mine the route that best suits your cir­cum­stances. But once that hur­dle has been cleared, lo­cal in­vestors are spoiled for choice.

Many rand-de­nom­i­nated unit trusts pro­vide ex­po­sure to off­shore as­sets.

Sim­i­larly, in­vestors could elect to in­vest via ex­change traded funds (ETFs) that of­fer ex­po­sure to off­shore in­dex funds or trackers.

BayHill Cap­i­tal, part of the Pere­grine Group, of­fers a vari­a­tion on vanilla ETFs that track global stocks, mar­kets or in­dexes. Com­pany MD Ge­off Blount ex­plains that its ac­tively man­aged ETF port­fo­lios are es­sen­tially bas­kets of off­shore ETFs struc­tured to meet in­vestors’ needs and risk pro­file.

BayHill man­ages this bas­ket, ad­just­ing the hold­ings to en­sure the per­for­mance of the port­fo­lio ac­cord­ing to the client’s man­date.

“When buy­ing ETFs for our clients, we don’t try to pick in­di­vid­ual stocks, but rather look at the big-pic­ture themes and try to be smart and in­tel­li­gent about how we al­lo­cate that cap­i­tal,” he says.

“Peo­ple want to know who is man­ag­ing their money. They want to know that if there is a prob­lem they can ac­tu­ally phone some­one. Hence, we have no­ticed an in­creased ap­petite to use SA providers for man­ag­ing off­shore port­fo­lios be­cause they can iden­tify with the firm man­ag­ing the money, rather than an anony­mous call cen­tre over­seas.”

The con­cept of bas­kets or bun­dles of ETFs, pack­aged for con­ve­nience and spread­ing of risk, is one that seems to be grow­ing in pop­u­lar­ity. Pur­ple Group has in­tro­duced this offering on its lo­cally fo­cused EasyEquities on­line plat­form aimed at re­tail in­vestors, and will be launch­ing a US-fo­cused offering in March this year.

Pur­ple Group CEO Charles Sav­age says the new offering, which would re­quire open­ing an off­shore in­vest­ment ac­count via the on­line plat­form, is in re­sponse to de­mand for di­rect ex­po­sure to the US mar­ket.

“Ac­cess for South Africans to own US shares is dif­fi­cult and ex­pen­sive,” he says. “We’ve been able to lever­age off our plat­form and part­ner lead­ing US fin­tech com­pa­nies to de­liver a sim­i­lar cost pro­file and iden­ti­cal user ex­pe­ri­ence to the one we op­er­ate here for JSE shares.

“Where pre­vi­ously ac­cess like this has been avail­able only to the wealthy, now ev­ery­one can own some of the dom­i­nant global brands they love and con­sume ev­ery day.”

The de­ci­sion-mak­ing has been sim­pli­fied by ini­tially offering only pri­mary in­dex stocks, in­clud­ing the S&P 100, Dow 30 and Nas­daq 100, and a sam­pling of up to 100 ETFs.

BayHill’s Blount says greater sim­plic­ity in ac­cess­ing off­shore mar­kets does not mean in­vestors should blindly jump into the mar­ket. Mak­ing the right off­shore in­vest­ment de­ci­sion is not only about se­lect­ing as­sets that will de­liver long-term re­turns, but that are also se­lected for tax and es­tate plan­ning ef­fi­cien­cies.

For in­stance, di­rect share­hold­ing, ETFs and unit trusts trig­ger cap­i­tal gains tax if any of these as­sets are sold. A wrap­per prod­uct such as an en­dow­ment does not.

“Cer­tain ju­ris­dic­tions over­seas may also charge es­tate duty on your in­vest­ments in those ju­ris­dic­tions. But if you have your in­vest­ment in an en­dow­ment wrap­per, this is sim­ply part of your SA es­tate and not sub­ject to those other off­shore taxes,” he says.

The trick for lo­cal in­vestors is to be dis­pas­sion­ate and to keep the longer-term vi­sion firmly in fo­cus.

Charles Sav­age … Own­ing brands

Ge­off Blount … Big-pic­ture themes

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