PROTECTING THE VALUE OF YOUR OFFSHORE NEST EGG

BY CHRISTO LINEVELDT, INVESTMENT SPECIALIST, CORONATION FUND MANAGERS

Investing offshore right now may seem like a risky endeavour when stocks are trading at record highs and income investments at record lows. Add a global pandemic in the background and the only thing that seems certain is that the future is very uncertain.

But then again, South Africa has its unique emerging market challenges and history has shown that offshore exposure is an important diversifier for local investors. Otherwise, all their wealth is vulnerable to currency volatility, an economy that is struggling to deliver and, at times, heightened political risk.

In a lower-for-longer interest rate environment, cash effectively yields 0% in the developed world. Thus, if you want to achieve consistent real returns in hard currency but cannot tolerate risk, you need to invest with a fund manager who knows how to navigate the risks and opportunities that arise in what are undoubtedly extraordinary conditions.

Traditionally considered low-risk assets, fixed interest instruments are now exhibiting more downside risk than ever before. At the same time, the five-month rally in US equities out of a bear market slump has raised concerns that stock markets may have moved too far, too fast to justify their elevated valuations.

It’s at times like these that diversification becomes even more critical: diversification across asset classes, countries, stock markets and currencies. But how do you do so without exposing your capital to undue risk?

Investors who want to incorporate more conservative offshore exposure in their portfolios while still achieving reasonable real returns of between 2% to 3% in USD over time will find this in the Coronation Global Capital Plus Fund.

The Fund is actively managed, has a low-risk exposure and is invested across asset classes. While it contains some of our best investment ideas for global growth, it has been moderated for investors with less tolerance for risk, such as retirees who are at the stage of their life when they need to prioritise the protection of their capital.

Global Capital Plus is globally unique, given that it is a balanced fund that has dual objectives: delivering a respectable real return while keeping a careful eye on risk. It gives retirees access to asset classes that will outperform cash and inflation over time, with a mandate that allows for more than half of the portfolio to be invested in growth assets.

The investment philosophy of the Fund is the same as our medium-risk global balanced fund but is optimised for risk first. As such, it is invested in growth assets like equities, real assets (such as infrastructure and property) and equity-like fixed interest income instruments. The balance of the portfolio is invested in assets that offer inflation protection, absolute returns and capital preservation.

The Fund is managed to preserve the dollar value of the fund over rolling 12- to 24-month periods. Bear in mind this target is not guaranteed, but investors in the Fund do get access to Coronation’s 21-year track record of managing global multi-asset class funds. As such, the Fund is comfortably positioned in the top quartile of similar global funds that are available to South African investors over five and ten years, as well as since inception.

Since launching our first global fund, Coronation has built up substantial international investment expertise and research capabilities. The global team comprises 22 skilled investment professionals with the expertise required to invest in non-South African shares across developing, emerging and frontier markets.

As a bottom-up, active investor, we do proprietary research on the available investment opportunities across the world. We then blend the most promising investment opportunities we have identified into resilient portfolios that are tailored to deliver risk-adjusted returns that meet our investors’ needs, no matter how challenging the global environment may be.•