2 minute read
Strong interest in offshore equity funds
BY DAVE CHRISTIE Offshore Product Specialist, Ashburton Investments
The Johannesburg Stock Exchange (JSE) All Share and Top40 indices have made a series of record highs in the recent months.
This has not deterred South African investors from continuing to invest apace in hard currency global equity funds such as the JSE-listed Ashburton Global 1200 Equity Fund of Funds ETF and the Global Leaders Equity Fund. We have seen record flows into these funds.
While many South African listed shares, and particularly the so called ‘SA Inc’ shares – like banks, retailers and local Real Estate Investment Trusts (REITs) – have rallied from very oversold levels, this, however, does not guarantee future returns.
Weak local economic fundamentals are a major contributing factor for investors’ preference for offshore markets. South Africa faces economic and industrial policy uncertainty of land expropriation, inflexible labour laws, among other populist pressures.
Add to that the current strength of the rand, which has helped drive up local shares and create a greater sense of confidence. A strong rand has provided South African investors with a window of opportunity to convert rand to hard currency and invest offshore, thereby globally diversifying their portfolios.
Many South African investors continue to take advantage of the weaker dollar, taking a long-term view on the rand.
As a locally listed, passive option, the low-cost JSE-listed Ashburton Global 1200 Equity Fund of Funds ETF (ASHEQF) has continued to grow in popularity, having recently reached R1bn worth of assets under management in just over three years since its launch.
It provides cost-effective, geographic and hard currency diversification in one simple JSE-listed investment that does not require the use of offshore allowances.
It captures 70% of the world’s market capitalisation through investing in seven regional ETFs as a way to keep costs low while ensuring tracking efficiency. These are the S&P500 (US), MSCI Europe, S&P TOPIX 150 (Japan), S&P/ TSX 60 (Canada), S&P/ASX All Australian 50, S&P Asia 50 and S&P Latin America 40.
Another appealing offshore investment is the actively managed Global Leaders Equity Fund. This fund is designed for people wanting to invest long term in a concentrated portfolio of the world’s most prominent companies, household names and industry leaders, such as Microsoft, Visa and Alphabet.
The Global Leaders Equity Fund gives investors access to mega-cap businesses, each with a market cap in excess of $20bn, with global presence and constituents of the major indices such as the FTSE, Dow Jones or Nikkei.
The Global Leaders Equity Fund aims to achieve longterm capital growth over the economic cycle by selecting no more than 25 equities with best-in-class management and solid balance sheets. One can invest directly offshore or utilise the Ashburton Global Leaders Equity ZAR Feeder Fund. Flows into the ZAR-based Global Leaders feeder fund have quadrupled in the last six months.
Whichever the route to offshore, it makes sense to invest in leading companies, technologies and industries, exposure to which is often not available on the JSE.
