MONEY
INVESTING OFFSHORE
I
nternational diversification
The performance of the rand
may be on top of your mind for
significantly impacts how investors
a multitude of reasons. Perhaps
perceive international investments.
you are tempted to increase your
The caveat to this argument is
retirement portfolio’s international
that too much offshore exposure
exposure due to current sentiment
can hurt your portfolio due to
towards the country, specific
inflation rates being much lower
currency expectations, or the
in international markets. South
recent disappointing returns from
African inflation is much higher
most local asset classes.
than the rest of the developed
It is, however, important to
world, which sets a significant
remember that having exposure to
hurdle for investors that want
foreign asset classes is not about
inflation-beating returns. For
timing. Instead, it is an allocation
instance, it is less relevant to get
that you should be making with
US dollar returns ahead of US
strategic (not temporary) reasons in
inflation when you are living in
mind. Moreover, there are specific
South Africa and require returns
considerations that are unique
ahead of SA inflation. This results
to those already in retirement.
in the unintended consequence
While it may be best to draw up a
of become too dependent on
comprehensive financial plan with
continued rand weakness.
a qualified financial adviser, we can offer the following general guidance to consider as part of your decisionmaking process.
REMEMBER THE CURRENCY IN WHICH YOU NEED TO FUND YOUR RETIREMENT INCOME You may have decided to spend
BE MINDFUL OF WHAT’S IN YOUR SHOPPING BASKET
the rest of your retirement years
investment is a balanced fund
in South Africa. This means you
where regulatory limits allow up to
Many items in your shopping
need to draw a rand-denominated
30% offshore exposure. In addition,
basket (from fuel to food to possibly
income from your living annuity
there are a multitude of JSE-listed
your biggest expense, healthcare)
portfolio over the long term. As
businesses that would make up part
are largely priced in foreign
the local currency can be volatile,
of your South African allocation,
currencies as the inputs are either
you should guard against having
but that are in fact truly global
commodities (with prices struck in
too much international exposure
businesses, such as Naspers, British
global markets), or heavily reliant
within your living annuity portfolio.
American Tobacco and Anheuser
on imported content. Having
Busch Inbev, to name a few. In the case of Coronation’s multi-asset
change in price of this part of your
YOU MAY ALREADY HAVE SUFFICIENT OFFSHORE EXPOSURE
future shopping basket. Episodes
As a retired investor, your
sufficient offshore exposure when
of currency weakness will more
retirement savings are likely to
you consider the total international
than likely remain a strong driver
be invested in a living annuity
exposure. Take the Coronation
of price increases into the future.
product of which the underlying
Capital Plus Fund (our flagship post-
adequate international exposure is a hedge against the long-term
40
SILVER DIGEST //SPRING 2019
funds aimed at post-retirement investors, you may already have
