Offshore investing is no longer a luxury reserved for a few. It is a realistic, easily accessible and important financial planning option for all serious investors seeking to protect and grow their wealth. Jean Minnaar, managing director of Old Mutual Wealth Private Client Securities, explains how to take maximum advantage of offshore investing.
In the eyes of many investors, there has always been a deep gulf between ‘local’ and ‘offshore’ investment. But times have changed. Special allowances and changes in legislation now make it far easier for local investors to take their money offshore. And ‘offshore’ means access to a huge array of options, with a choice of 195 countries.
There are three sound reasons to invest offshore:
- You gain access to investment opportunities that offer the highest expected returns.
- You spread your risk.
- You can plan your savings according to your future responsibilities.
By restricting themselves to local companies and markets, investors miss out on the chance to invest in some of the largest and fastest-growing business opportunities in the world.
Although the Johannesburg Stock Exchange (JSE) has some exposure to earnings from offshore companies and markets, these comprise less than 0,5% of the world’s markets.
Moreover, the JSE has seen several delistings in recent years and relatively few new listings, which means that investment options in the exchange are shrinking. Simply put, the JSE is dominated by a few large companies, often in natural resources, which offers private investors little diversification.
Offshore markets, on the other hand, give investors access to a vast range of industries and regions, and opportunities for high returns.
Asset liability matching
More and more investors, particularly high-income and high-net-worth individuals, are anticipating that their future responsibilities will be in other jurisdictions or currencies, and are planning accordingly.
This phenomenon, called ‘asset liability matching’, may include regular holidays abroad, a ‘swallow’ lifestyle, tertiary education abroad for a child, or emigration to settle near children in a foreign country and therefore requiring income-producing assets.
An offshore asset portfolio offers growth and income better aligned to match these responsibilities.
How much is enough?
As explained, it makes obvious sense for every South African investor to have a portion of his or her assets invested offshore. How much to invest, though, will depend on future liabilities. Investors who are highly exposed to South African expenses should not take too much offshore, but for investors who only need a small South African income base, it makes perfect sense to focus in the main on investment opportunities abroad.
Work with specialists
If you’re considering investing offshore, you would be well advised indeed to work with reputable specialists. There are numerous legal and tax implications, amongst others, and it takes specialist knowledge to structure an investment portfolio tailored to the unique objectives of every investor. Today, fortunately, these services are far more accessible than in the years of strict capital controls.
At Old Mutual Wealth Private Client Securities, our investment management philosophy is rooted in wealth preservation and creation. This, in brief, means selecting quality companies well placed to generate excellent returns over the long term.
This is why we get to know clients personally and understand their risk profile, specific expectations for income, and changing needs over time – and accordingly build the optimal portfolio for every client.
About Private Client Securities
Private Client Securities (PCS) is a capability within Old Mutual Wealth that includes several licensed financial services providers in the Old Mutual Group. PCS specialises in bespoke investment management.
Whether your goal is to grow your wealth, generate income or preserve capital, we select the most suitable investments based on your investment strategy and our extensive research and collective insight. We craft tailored share portfolios, investing directly in high-quality companies, both locally and globally.
Phone us at 021 524 4670 or email email@example.com.