Many investors rush for the exit at the same time, causing a whip-saw effect in asset prices.
The Rand is particularly vulnerable to this as one of the major currencies.
Emerging market (EM) investors can use it as a proxy for less liquid EM currencies, and use it to hedge as it has the benefit of straddling trading hours in parts of Asia and America.
There are two ways for you to get offshore exposure:
1. Direct Offshore investments
This option requires you to externalise your ZAR into “hard currency” to be invested in an account / product domiciled in another country. This requires the transfer of ZAR through SA exchange controls (which FINOVA can assist with). Transfers are subject to the annual individual limits, alternatively you can make use of asset swap capacity.
Direct investments are preferable for clients looking to build up an offshore asset base for specific purposes.
I’m talking about funding your children’s overseas university fees, immigration, your retirement in foreign jurisdictions or maybe you have concerns over local legislative changes, which may affect your rights in South Africa.
Taking money offshore is a way to protect your assets and wealth in hard currency terms.
FINOVA make use of multiple offshore providers and can house your assets in the most suitable vehicle for you, including a Swiss based bank account providing a full suite of investments. Minimum portfolio starting amount is R250,000.
Many investment managers beat the drum that the JSE is a small fish in a massive global pond and you shouldn’t have most of your assets concentrated in SA asset classes.
So, you can also access offshore focused investments, which is the second way to get offshore exposure.
1. Locally Domiciled offshore investments
Locally domiciled offshore exposure is a simple way to invest offshore. It can be accessed quickly and at reasonable cost.
You can use local products like ETFs, Unit Trusts, Endowments, Structured products and even local shares that generate most of their revenue or are solely based offshore. Companies like BTI, Richemont, offshore property companies and precious metal miners are a few examples.
This is the “hassle” free way to get offshore exposure. You can access the funds at a moment notice in most cases, whereas offshore domiciled assets should remain there as long as you can.
To find out more about the different options available locally and offshore and what’s the most suited to you, email us at firstname.lastname@example.org
or call our trading desk on 0101095510.
See you next week.
Contributing Editor, Money Morning