Investors are still heading offshore

Ingé Lamprecht Moneyweb

For long-term investors, international exposure is an important part of a sensible, well-diversified portfolio.

Often, however, externalising money from SA has been a kneejerk response to rand weakness.

Unfortunately, many investors have severely regretted such a decision, as the rand has often recovered well after a major blowout. Moreover, investors may have bought/sold assets when they were expensive, hampering subsequent returns. Ultimately, the decision to invest offshore should consider a range of factors – including the valuation of assets investors are buying and selling and whether they actually need additional offshore exposure.

Glacier International’s Andrew Brotchie says in its experience, offshore investment flows have generally increased quite significantly during periods of rand weakness over the last three years.

Typically, they’d have expected flows to dip off when the rand strengthened, but during the last few months the opposite has happened.

“This is actually the first time since we’ve been running Glacier International that this relationship [between rand weakness and offshore flows] has broken down to this extent.”

In fact, during 2018’s first quarter the firm experienced its biggest quarter from an inflows point of view.

Brotchie believes this has, in part, been a response to the relatively weak returns SA investors experienced in the local market over the last three years.

Against this background, many investors have started to explore alternative avenues hoping to get higher returns – one of them international markets.

But the development seems to have been compounded by other issues.

“One is JSE concentration and Naspers’ huge success has clearly skewed the index and I think people are concerned about the overexposure within the index.”

Brotchie says another factor has been the experience investors have had within the SA sphere – including Steinhoff’s share price meltdown.

“I think people have started to look quite seriously at the opportunity set that they have within the SA market.”

He says their conversations with brokers suggest there’s been a strategic realignment of portfolios.

JSE concentration and Naspers’ huge success has skewed the index.

Andrew Brotchie Glacier International