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, and this should be one of your key consideration during 2019. Many barriers to offshore investing 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 by diversifying offshore. Jim Millar, Managing Director at Financial Fitness, has spent many years researching profitable and diversified opportunities abroad.

Diversification with offshore investing

South Africans Offshore Investing. Protecting Your Rand Income

Ever thought of investing offshore from South Africa. Here’s my take in it…

South Africa has been good to me and I’m fairly sure it’s been good to you. The southern end of Africa (including Botswana, Namibia and Swaziland) has such an abundance of wild life, beautiful scenery, amazingly diverse people and climate variations there’s simply something for almost everyone to fall in love with. In other words, who wouldn’t want to spend their life with one foot in the Atlantic and the other in the Indian Ocean? Did you suddenly visualise yourself sitting on a wooden jetty at Cape Point cooling your feet in the salty water where the oceans converge? (If not before, you just did it now).

If you agree with my rose tinted attempt at winning ‘tourist ambassador of the year’ you may be a little resistant to my next assertion that, while living in Southern Africa is glorious, a Large Percentage of Your Money should be invested offshore. I hear you “why, what’s the problem?”

What IS the problem?
Well, the next few paragraphs could be an outline for a book on Offshore Investment Risks facing Southern Africans but I know you’re busy so (in my usual style) I’ll keep each explanation as short as possible.

Why South Africans invest offshore

If we start by ignoring everything that our local SA news stations try to terrify us with, on a daily basis, the South African stock market offers little more than just 1% of all the global equity investment opportunities. That means (yes, you guessed it) around 99% of all equity investment opportunities reside offshore, in other countries. Clearly, as it currently stands, the combined USA exchanges total over 40% of world equity capitalisation, followed by Asia (China, Japan, Hong Kong etc.) at approximately 33% of global listed valuations, with Europe (the UK, Germany etc.) trundling along at a combined total of around 20%. So as South African, if you have no offshore investment exposure to those three major regions you are missing out on 93% of the offshore investment 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 market is the King Kong with the USA issuing 43% of the total obligations, followed by Europe at 27%, Japan at 13%, various Emerging Markets at 12% and the balance at 5%. This is simply a Huge playing field and the smart International Income Fund Managers have a massive opportunity set.

Offshore property

“Who cares?” you might be saying, because South African property offers great returns (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. While this is a hard market to measure, most estimates currently peg the Global Listed Property Market around $8.5 Trillion. The Gorilla is (yip!) the USA at 35% of the pie, Japan at 9%, UK at 8%, then Germany and China around 6% each. While there’s no denying that South Africa has, during certain periods, yielded excellent property returns, it only weighs in around the baby chimp size of 0.6% in Global Listed Property jungle.

Advantages of investing offshore

Why South Africans are investing offshore

If you accept the above, as an illustration of potential ‘opportunity cost’ I could now, swiftly, move on-to adding fuel to the fire of local SA news about corruption, violent crime, fiscal mismanagement and mafia types masquerading as socialist crusaders but, I suspect, the media has already ‘done that number’ on you. Enough said.

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, loony governments and loony governments the Rand has, over the past 30 years, deeply depreciated. In a nut shell, the Rand has lost 431.7% against GBP and – wait for it – 654.9% against USD! It is not a good investment.

Many of you may now have tippled why I’ve titled this piece ‘Protecting Your Rand Income’

Performance Line Chart.

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. If you’re planning to live more than 5 years after reading this, you should keep reading, if not, please book that world cruise immediately.

What’s the solution? Offshore financial advice.
Thanks to that thing we hate, instant connectivity to all the local and international turmoil, aka The Internet, 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 – while most of us know how to look out for sharks in our surrounding seas, it’s a little harder to spot the ‘land sharks’ that lurk in the mass of International Fund choices. Like sea sharks, they do have some telling Fins and Tails but they are sleek, slippery and tricky to sight amongst the thousands of highly desirable ‘Big Fish’ that make up Global Investment Opportunities.

Offshore financial advisor at Financial Fitness
That’s why we, at Financial Fitness, led by yours truly, have been taking the time and trouble (since 2010) to research, select and visit the offshore investment Fund Managers and Administrators that appear to have all the ingredients of size, stability, compliance and performance which are the legs of a solid Portfolio Platform.

Size of offshore investing company; while we know that smaller offshore 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 company; it’s well know that if a business can survive for 5 years it is probably past the ‘bad idea’ risk. 10 years are better and 20 years are better still.

Compliance of offshore investment company; in the past it was far too easy to be heavy on marketing and low on administration. That’s all changing with the rise in offshore investor regulation but, as you know, ‘sharks don’t enjoy changing their spots’ or some adage like that?

Performance; offshore investment management is one of the few professions that searches for guys and gals with grey hair. Let’s face it, you can only have a track record if you’ve spent a bit of time on the track. In my 36 years of connection with the offshore 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’.

Offshore Investing South Africa. What next?
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 investing options
  • Top offshore investment companies
  • Offshore investments tax implications
  • Benefits of offshore banking
  • Offshore investing risks and rewards
  • Offshore investing advantages and disadvantages
  • Offshore investing tips
  • Types of offshore investments
  • Trends within offshore investing

 

Offshore Investing with Jim Millar

 

 

 

 

 

Jim Millar, Managing Director, Financial Fitness

Just send your enquiry to jim@finfit.co.za or call +27 11 802 0888.

Financial Fitness Services 21 Stuart Avenue Morningside Manor Sandton 2196