In­vest­ing off­shore

Finweek English Edition - - MONEY -

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-

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