Some South Africans have been taking advantage of the more relaxed exchange control regulations and investing in offshore markets to help ensure a secure financial future. There are many barriers to offshore investing that have been lifted and the amount that can be invested by South Africans outside our local markets has been considerably increased. There are now so many more opportunities for increasing your wealth potential with this diversification tool. Jim Millar, Managing Director at Financial Fitness, has spent many years researching profitable and diversified opportunities abroad and has provided a thought provoking overview.
Offshore Investment Risks facing Southern Africans
Why do we do it
Besides the benefits listed further in the article, most invest due to the corruption, violent crime, fiscal mismanagement and mafia types masquerading as socialist crusaders.
Rand depreciation
Therefore, I’ll curtail this section with something that’s Far More Scary – Rand Depreciation. One of the most frequent questions I’m asked is ‘where’s the Rand going?’ and, over the short-term, no one knows. But through thick and thin, good and bad times, war and peace and loony governments the Rand has, over the past 30 years, deeply depreciated. In a nutshell, the Rand has lost 431.7% against GBP and – wait for it – 654.9% against USD!
Offshore Equity investing
The problem is that South Africans are missing out on a large portion of the global investment universe by only investing in SA. The JSE offers only 1% of all the global equity investment opportunities. That means around 99% of all equity investment opportunities reside offshore, in other countries. The Combined Capital in world exchanges, as it currently stands are:-
- USA exchanges total over 40% of world equity capitalisation, followed by
- Asia (China, Japan, Hong Kong etc.) at approximately 33% of global listed valuations,
- Europe (the UK, Germany etc.) trundling along at a combined total of around 20%.
So, if you have no offshore investment exposure to those three major regions you are missing out on 93% of the offshore opportunities. Recent stats value the Global Equity market at $70 Trillion!
Offshore bond investing
Then, let’s look at the Bond Markets. If $70 Trillion makes your eyes water, Global Bonds at $92 Trillion may invoke a sharp intake of breath. This is simply a huge playing field and the smart International Income Fund Managers have a massive opportunity set. This market is the King Kong with the following breakdown
- USA issuing 43% of the total obligations, followed by
- Europe at 27%,
- Japan at 13%,
- Emerging Markets and others at 17%
Offshore property
South African property has offered a great return (or did for a long time) and you can ‘touch’ it. There is, of course, a lot of comfort in that and, yes, many of you have made good money (in nominal, if not real, terms) from your ventures into real estate. However, once again, the Big Cash Generating Cathedrals have their foundations in distant lands. The South African property market only weighs in around the baby chimp size of 0.6% in the Global Listed Property jungle. While this is a hard market to measure, most estimates currently peg the Global Listed Property Market around $8.5 Trillion.
- The Gorilla is the USA at 35% of the pie,
- Japan at 9%,
- UK at 8%, then
- Germany and China around 6% each.
Offshore investment planning
Yes, in world terms, your Rands are depreciating but the cost of living keeps moving upward. Those who had local Equity and Property investments, over the past 30 years, have done better but the Real Winners have been those who converted some Rands into USD or GBP then invested in Global Assets.
What’s the solution? Offshore financial advice
With Instant connectivity to all the local and international Information, it is now almost as easy to have a Global Portfolio as you’ve been used to with your local accounts. This, you might have expected, comes with a caveat – it’s a little harder to spot the right International Fund choices. That’s why we, at Financial Fitness, have been taking the time and trouble (since 2010) to research, select and visit the offshore Fund Managers and Platfroms that have all our requirements, namely;
Size of offshore investment company; while we know that smaller boutique firms can often attract some of the most talented managers we simply want to see if they have crested the wave of long-term solvency.
Stability of offshore investment company; Long term reputation with a growing footprint. 10 years are better and 20 years are better still.
Compliance of offshore investment company; there has been a marked increase in regulations in this area making it easier to deal with above board long term companies.
Performance; offshore investment management is one of the few professions that searches for guys and gals with grey hair. In my 36 years of connection with the investment markets I have found that the more mature Bulls have learnt a lot about Bears and how to handle them without too much ‘snot n trauma’.
Let’s start with a cup of imported coffee, some local biscuits and a fun chat over the pros and cons of offshore investing from South Africa and about how you can easily Protect Your Future Rand Income. We would be more than happy to converse with you about:
- Your best offshore investment options
- Top offshore investment companies
- Offshore investments tax implications
- Offshore investing advantages and disadvantages
- Types of offshore investments
