The rand (ZAR) has been a major feature in markets for the month of May on the back of a 12% drop relative to the dollar. The currency had been f lat up until 9 May 2013 and then turned south in an almost vertical l ine, seemingly gathering pace towards the end of the month. The sudden weakness caught many off guard, including President Jacob Zuma who was conveniently blamed for the move throughg the py psychological R10/$ level.
As it was i n 2008/ 2009, I took numerous calls from clients wanting to know how and if the move had impacted on their portfolios, and the evergreen question when the currency behaves as it is doing at the moment: “Should we be taking more money out the country now?” Fortunately, we always allocate a portion of clients’ investments into offshore markets, either via an asset swap fund (a rand-denominated offshore unit trust fund) directly, or via a multi- asset class f und where we know t hat t he manager has a large offshore weighting.
At times l i ke this, we f ind ourselves having to revisit the longterm proposition of an offshore exposure in a client’s portfolio. The graph below shows the performance of t he dollar i n rand terms. Offshore investing is, and should always be, about more than the currency. However, it is obvious from the alongside that the behaviour of the currency is an important factor for investors to consider. An analysis of the graph reveals a number of issues that investors need to consider when constructing an investment portfolio: weakness has only yy yielded around 6% per annum return for investors.
weakened from June 1993 until December 2001, a period of more than eight years. trend 13.5 of the 20 years.
usually very sharp moves towards the end of such a weakening trend. Volatility is a feature.
What this shows us is that there def-