More in­vestors look off­shore - Old Mu­tual unit

The Star Early Edition - - COMPANIES - Ka­belo Khu­malo

WAYNE Sorour, the head of Old Mu­tual In­ter­na­tional South Africa, said yesterday in an in­ter­view with Busi­ness Re­port that high-net-worth South African In­vestors were in­creas­ingly tak­ing ad­van­tage of their R10mil­lion al­lowance to in­vest off­shore as a means of mit­i­gat­ing the risk of over-con­cen­trat­ing as­sets do­mes­ti­cally.

Sorour said while di­ver­si­fi­ca­tion of as­sets was the main strate­gic rea­son for off­shore in­vest­ment, the lure of var­ied op­tions and abil­ity to hedge against the volatil­ity of the rand were strong in­cen­tives.

“For in­stance, if in­vestors wanted to in­vest in the phar­ma­ceu­ti­cal sec­tor on the FTSE/JSE, the op­tions are limited to just Aspen, As­cendis and Ad­cock In­gram. How­ever within the global mar­ket there is a selec­tion of over 60 phar­ma­ceu­ti­cal com­pa­nies, and that’s just on the London Stock Ex­change,” Sorour said.

The SA Re­serve Bank has mea­sures in place to limit the amount of money in­di­vid­u­als can in­vest abroad. One con­di­tion is that an adult tax­payer in good stand­ing may in­vest R10m in his or her name out­side the com­mon mon­e­tary ar­eas of Le­sotho, Swazi­land and Namibia, per cal­en­dar year.

In ad­di­tion, up to R1m, within the sin­gle dis­cre­tionary al­lowance fa­cil­ity, may be trans­ferred abroad.

Maarten Ack­er­man, an in­vest­ment strate­gist at Ci­tadel, said off­shore in­vest­ment pro­vided in­vestors with more in­dus­tries, com­pa­nies and di­ver­si­fi­ca­tion op­por­tu­ni­ties.

“It is at­trac­tive be­cause it pro­vides cur­rency di­ver­si­fi­ca­tion into less volatile hard cur­rency and away from pos­si­ble rand weak­ness and bet­ter growth dy­nam­ics given other faster grow­ing mar­kets. Given the cur­rent val­u­a­tions, it of­fers bet­ter growth and earn­ings po­ten­tial and lower val­u­a­tions com­pared to lo­cal stocks,” Ack­er­man said.

Sorour said in­vestors must not just fo­cus on max­imis­ing re­turns, as tax im­pli­ca­tions and es­tate plan­ning must be fac­tored into the ul­ti­mate de­ci­sion to in­vest abroad. “All th­ese fac­tors can im­pact the ul­ti­mate suc­cess of an in­vest­ment, for ex­am­ple if an in­vestor with off­shore were to pass away, there may be con­se­quences of not hav­ing an off­shore will.”

He said with re­gard to re­turns, for­eign eq­ui­ties were at­trac­tively priced com­pared with bonds and cash. It was crit­i­cal for in­vestors to source qual­i­fied, in­de­pen­dent fi­nan­cial ad­vis­ers be­fore mak­ing any off­shore in­vest­ment.

Ack­er­man said off­shore eq­ui­ties pro­duced di­ver­si­fied re­turns and pro­vided a cush­ion needed by in­vestors.

PHOTO: REUTERS

The Cape Town head­quar­ters of Old Mu­tual In­ter­na­tional South Africa. Wayne Sorour, the firm’s chief ex­ec­u­tive, says in­vestors must not fo­cus only on max­imis­ing re­turns.

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