30 September 2019 | www.moneymarketing.co.za
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WHICH ETFS DO I CHOOSE? Selecting the correct ETFs that will reduce risks, cut costs and still provide attractive returns can be a difficult task Page 12
MoneyMarketing's guide to investing offshore in volatile times
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Increasing offshore exposure to protect capital
T
he poor performance of the “The current economic landscape JSE over the past five years can is not sustainable for business or undoubtedly be attributed to individuals – something has to give the inept way in which South Africa when we put all the statistics together,” has been managed. Low economic he adds. “If you look at the basic growth, high unemployment and the economic issues we currently face, precarious state of Eskom’s finances, the reality is that there’s no immediate coupled with the looting that state turnaround in sight. Some economists capture brought about, has made many will say that the rand is undervalued, think again before investing all their okay – but what significant funds in the local market. fundamentals would need to In the past five years, the total change in order for the local dollar return on the S&P 500 was currency to recover? We believe 61% versus a loss of 4.7% for the issues are just too big. From the JSE’s Top 40 index in dollar an investment perspective, it terms. “Of course, past returns is the uncertainty that we are are no indication of future trying to de-risk for our clients.” returns, but it is hard Many South Africans are to see a spectacular susceptible to what is turnaround in South termed ‘home country Africa’s fortunes – in bias’ – defined as the fact, things may get tendency for investors worse,” says Nick to favour companies Pitro, Global Senior from the countries Consultant at in which they live. independent wealth This is a worldwide Nick Pitro, Global manager, Austen phenomenon and Senior Consultant, Morris Associates. certainly not unique Austen Morris Associates to South Africa.
Locally, there is also a feeling that it is unpatriotic to move money away from local markets to those offshore. But is investing about patriotism? “I am a South African – I’ve lived here all my life,” says Pitro. “I love our country and I am saddened by the current economic landscape. It is unfortunate that not a single day seems to go by that we don’t read another dire update about corruption, corporate mismanagement, declining GDP, SOE bailouts, credit downgrades, and the list goes on. However, if I was someone in my sixties – approaching my retirement – and I had seen my pension grow by a measly 2% to 4% net of fees (as most people have), I would certainly be considering my options. We are constantly looking for value for our clients and believe that the offshore investment space provides an appropriate and functional way to diversify away from domestic influence. Diversification is key and we believe that individuals should consider all of their options when looking at their investments.”
If investors have a house and pension here in South Africa, they should keep them – but take as much of their investable money as they can offshore, as staying invested in local assets will likely erode their wealth over time. “Our client profile is typically wealthier individuals (perhaps the top 5% to 10% of income earners) and we often advise that discretionary savings (salary bonus, monthly surplus, cash in bank, etc.) should be considered for an offshore investment. This provides for a portfolio that is de-risked from South Africa and allows our clients to benefit from global growth.” He explains that Austen Morris Associates is a completely independent advisory business that’s been around for 25 years. “We’re globally headquartered. We have a lot of exposure to what is happening around the world. In South Africa, we manage many rand assets, individual retirement savings, some employee benefit schemes and of course offshore assets. Continued on page 3
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