UP AND AWAY
and BMW can be purchased directly. Offshore investments have traditionally been centred around developed markets, which makes sense, as SA asset prices are highly correlated with emerging market asset prices, but enjoy only moderate (even low) correlations with developed market assets.
Something not often considered, however, is how SA asset prices correlate with frontier markets.
By simply looking north of our borders, the diversification benefit will be even greater than investing in the US. The MSCI South Africa has an only 0.2 correlation with the MSCI Africa (ex-SA). Thematic investing is a way to make investment decisions based on predictions about trends, rather than on past performance of the market or the fundamentals of a specific company. By digging a little, you can identify the companies that could change the world, and provide you with attractive returns.
While this sounds good, it’s difficult to self-identify the best way to benefit from changes in the way that society operates. In this case, one can consider investing in thematic ETFs focusing on artificial intelligence, robotics, me- dical advances, and even just the digital economy.
Many options are now available which don’t require using your yearly Reserve Bank-stipulated offshore allowance. SA-based investors can look at inward-listed shares on the JSE or ETFs and unit trust funds.
With geopolitical risk rising, currency volatility in many emerging markets, and growth arguably peaking in developed markets there’s still a case to be made for putting your eggs in as many baskets as possible.
Chantal Marx is head of research at FNB Wealth and Investments
The rand strengthened against the US dollar this week amid broad greenback weakness as investors began to worry about the impact of higher US interest rates on the US economy, reports NKC Research.