Big changes in off­shore in­vest­ing:

An­drew Brotchie: MD Glacier In­ter­na­tional, a di­vi­sion of San­lam Life

Financial Mail - Investors Monthly - - Cover Story -

With the glob­al­i­sa­tion of the news cy­cle there's been an in­crease in vis­i­bil­ity to the out­side world. A world South Africans want to be part of. Whether or not to in­vest in the global mar­ket isn't the ques­tion any­more: now, it's about how to ac­cess th­ese op­por­tu­ni­ties smartly -and, how to bal­ance lo­cal and off­shore in­vest­ments. That's not a con­ver­sa­tion we're hav­ing in iso­la­tion. It's a con­ver­sa­tion hap­pen­ing all over the world.

The rapid shift is also linked to SA dra­mat­i­cally re­lax­ing its ex­change con­trol. In 1997, you could take R200k over­seas in your life­time. Now it's R11-mil­lion per per­son, per an­num or more. Ad­di­tion­ally, ex­penses are down. Ten years ago, you'd pay more for your in­ter­na­tional port­fo­lio than your lo­cal port­fo­lio; now, they're very com­pa­ra­ble with sim­i­lar fees - in fact, in­ter­na­tional port­fo­lios are of­ten cheaper.

Here’s an­other big change. At the start of the year, the rand strength­ened, and pre­vi­ously, we’d have seen the flow of money leav­ing the coun­try slow­ing down. But it ac­tu­ally in­creased. Whereas, be­fore, in­vest­ment de­ci­sions were some­times psy­cho­log­i­cally linked to the volatil­ity of the rand, now, we're see­ing far fewer emo­tional de­ci­sions be­ing made. When the rand blew out at over R15 to the dol­lar, peo­ple didn't panic and move their money. They recog­nised that the rand was over­shot and waited to see what hap­pened. This marks a de­par­ture from the 'boom or bust' men­tal­ity. Many peo­ple

are also per­ceiv­ing the ben­e­fits of hav­ing a por­tion of their as­sets off­shore and a por­tion in SA. Ef­fec­tively, they're us­ing diver­si­fi­ca­tion as a buf­fer to be­come less ex­posed to one event. That's where an ad­viser proves in­valu­able in help­ing to get the bal­ance right.

While it's dif­fi­cult to say what most peo­ple opt into in terms of off­shore in­vest­ments, in my ex­pe­ri­ence, a typ­i­cal as­set mix would be 70% bal­anced di­ver­si­fied funds and 20 to 25% global eq­ui­ties. Most af­flu­ent South Africans are al­lo­cat­ing funds to for­eign eq­uity mar­kets, above bonds, prop­erty and for­eign cash. The riskier cur­rency ex­po­sure and dif­fer­ent mar­kets mean that a long-term eq­uity growth port­fo­lio is usu­ally most ef­fec­tive. Ad­di­tion­ally, some peo­ple see the ben­e­fits of SA li­a­bil­i­ties be­ing cov­ered by SA in­vest­ments.

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