Big changes in offshore investing:
Andrew Brotchie: MD Glacier International, a division of Sanlam Life
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.