Eas­ier to go off­shore

The num­ber of op­tions is in­creas­ing for in­vestors want­ing to move their money abroad, writes Jo­hann Barnard

Financial Mail - Investors Monthly - - Feature: Global Investing -

Lo­cal in­vestors need not be con­cerned about a lack of op­tions when con­sid­er­ing off­shore ex­po­sure. A steady re­lax­ation of forex con­trols pro­vides gen­er­ous enough for­eign cap­i­tal al­lowances, com­ple­mented by a grow­ing num­ber of funds and plat­forms of­fer­ing di­rect ex­po­sure to global mar­kets.

In­vestors have lit­tle ex­cuse not to con­sider broader di­ver­si­fi­ca­tion of their port­fo­lios. They have long been able to ex­plore off­shore op­tions through rand-de­nom­i­nated col­lec­tive in­vest­ment schemes, but there has been con­sid­er­able move­ment of late from lo­cal in­sti­tu­tions of­fer­ing di­rect own­er­ship of off­shore as­sets.

In the past few months Sas­fin has launched a global eq­uity fund domi­ciled in Lux­em­bourg and Pur­ple Group has ex­panded its on­line share trad­ing plat­forms to in­clude di­rect own­er­ship of New York Stock Ex­change-listed stocks and ex­change traded funds (ETFs).

Syg­nia has bought out Deutsche Bank’s glob­ally fo­cused db X-tracker ETFs and Sa­trix listed three new ETFs of a com­pa­ra­ble pro­file to Syg­nia’s re­named Itrix funds.

For Pur­ple Group CEO Charles Sav­age, the in­tro­duc­tion of di­rect own­er­ship in US shares is a nat­u­ral pro­gres­sion of the com­pany’s mis­sion to make share own­er­ship sim­ple, af­ford­able and even fun.

Build­ing on the suc­cess of its EasyEquities on­line trad­ing plat­form, he says the in­ter­est has been driven less by lack of con­fi­dence in lo­cal shares than by a de­sire from a younger crop of in­vestors to get ac­cess to global brands they love.

“Who doesn’t want to own Ama­zon, Ap­ple, Alibaba or Tesla — names that de­fine this gen­er­a­tion? They have grown up with these brands and their affin­ity for them is far greater than any eco­nomic or po­lit­i­cal fear they might have for the SA en­vi­ron­ment,” he says.

Prior to go­ing live, Pur­ple Group un­der­took a fairly lengthy process of try­ing to un­der­stand their users’ pref­er­ences and mo­ti­va­tions when look­ing at global stocks. Sav­age says there is no sin­gu­lar rea­son for users’ choices: some, for in­stance, like Tesla be­cause of Elon Musk’s SA her­itage, while oth­ers have a fun­da­men­tal ap­pre­ci­a­tion of the dis­rup­tion that the car and en­ergy com­pany prom­ises to de­liver.

The com­pany is bank­ing on lever­ag­ing the suc­cess of its on­line plat­form to at­tract in­vestors want­ing to ex­pand their hori­zons.

“The US was the most ob­vi­ous first step for us be­cause it of­fers the most en­gag­ing brands, and the broad­est ETF uni­verse. What is clear from the en­gage­ment that we’ve had is that the big­gest bar­rier to en­try for users is ac­tu­ally mov­ing money off­shore.”

Sav­age says the ac­count open­ing process for an off­shore ac­count won’t be too oner­ous. The chal­lenge for most SA in­vestors, he say, is go­ing to be the cost in­volved. This is not only in trans­ac­tion fees, but also the min­i­mum amount of money that can be moved off­shore and min­i­mum trans­ac­tion val­ues that are al­lowed.

“This is not a prob­lem we can’t solve over time, but we’re look­ing to see how we can make that eas­ier for our cus­tomers,” he says. “Un­for­tu­nately, for the small in­vestor who only has R1,000 to move off­shore, it’s go­ing to be dif­fi­cult and ex­pen­sive for now.”

Apart from the di­rect own­er­ship of­fered by Pur­ple Group, in­vestors have no short­age of for­eign, or rand-de­nom­i­nated, col­lec­tive in­vest­ment scheme funds to choose from. These funds of­fer a wide va­ri­ety and mix­ture of as­set classes.

The grow­ing ap­petite of SA in­vestors to di­ver­sify away from lo­cally listed shares in part mo­ti­vated Sa­trix to launch its MSCI World, MSCI Emerg­ing Market and S&P 500 ETFs.

These rand-de­nom­i­nated funds com­ple­ment Sa­trix’s off­shore, hard-cur­rency funds.

“For quite a while we’ve had for­eign in­dex track­ers, so these ETFs are a nat­u­ral ad­di­tion to our global of­fer­ing,” says Sa­trix CFO Rick Martin. “We’ve seen big de­mand, and it’s an ob­vi­ous as­set class that one would want to add to a port­fo­lio.”

Candice Paine, a fi­nan­cial con­sul­tant who has worked with Sa­trix, says one of the ben­e­fits is that the funds should en­cour­age a more reg­u­lar ex­po­sure to off­shore as­sets rather than panic-driven buy­ing at times of lo­cal up­heaval.

“When­ever the rand blows out or there’s some po­lit­i­cal co­nun­drum, you see re­tail in­vestors run off­shore. Now you don’t need to do so at a point of ex­cep­tion, but build that into your port­fo­lio over time with smaller amounts of money if nec­es­sary,” she says.

Martin says the funds en­able in­vestors to con­tinue to grow their off­shore ex­po­sure, should they have reached their for­eign cap­i­tal al­lowance.

Pic­ture: iSTOCK

Charles Sav­age … aim is to sim­plify share own­er­ship Pic­ture: JAMES OATWAY

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