INVESTING OFFSHORE: WHEN YOU WANT TO KEEP YOUR OPTIONS OPEN
Published December 2019
So you’re already saving for retirement and have some additional money you’d like to invest. You think it’s a good idea to give your money access to opportunities available in markets outside of South Africa, so you are thinking about investing offshore.
Your decision-making dilemma is that you don’t know how much of this additional savings you should be investing offshore, as you don’t have any specific investment goals that require spending in a foreign currency. But you know that could also change in future. You need options and ideally to entrust someone to make the most appropriate decisions on your behalf.
The good news is that you can keep your options open and still give your money access to a greater set of opportunities by investing in a rand-denominated worldwide flexible fund, such as the Coronation Optimum Growth Fund, that aims to provide long-term growth for your investment in local currency terms.
Why should I consider investing in Coronation Optimum Growth?
By investing in Coronation Optimum Growth, you give your money the ability to be invested anywhere in the world and in any asset class, without you having to worry about the details. You don’t even have to convert your rands into foreign currency.
The fund managers will decide, on your behalf, how much of the portfolio gets invested in international assets (typically between 50% and 90% of the portfolio) and in which asset classes. To find the best long-term investment opportunities for you, they draw on the research and support of a global investment team of 67 professionals who cover equities, bonds and property across the domestic, international developed, emerging and frontier markets.
One example of the long-term investment opportunities that you can access via Coronation Optimum Growth is those luxury goods companies run by astute management teams with large shareholdings in their personal capacities, such as LVMH and Kering. (You can read more about these investments here.)
How did these opportunities deliver over time?
By focusing on building a fund that comprises of what we believe to be the best long-term investment opportunities across the globe, Coronation Optimum Growth has delivered a return of 14.4%* per annum (or 8.4% per annum after accounting for inflation) since its inception more than two decades ago. Put simply, by investing in this fund on the day of its inception, you would have increased your purchasing power by 4.7 times. This compares to an increase of 2.4 times your purchasing power had you invested in the developed market equity index (as measured by the MSCI World Index) over the same period.
What do I do if my goals change?
At some point you may want to start investing for a specific goal, such as an overseas holiday, paying for a child’s international education, or living abroad yourself. This would mean that you will need to spend some of your savings (outside of your retirement fund) in a foreign currency in future.
If these become your kind of goals, then consider investing in a foreign-domiciled international fund that only holds international assets such as Coronation Global Managed or Coronation Global Capital Plus. You can use some or all of your R1 million annual discretionary foreign allowance to invest in these funds. You can also apply to SARS for an additional foreign investment allowance of R10 million per year.
Given that the above funds require a minimum investment of $15 000 (roughly R220 000 at current rates), you can invest a smaller amount (starting at R500 via monthly debit order) in the equivalent rand-denominated feeder fund that still gives you all the benefits of international exposure but allows you to build up capital in rand terms first before you eventually invest it in a foreign-domiciled fund. Or you can use some of the capital that you’ve built up in Coronation Optimum Growth for this purpose.
Investing Offshore with Coronation
Coronation offers a range of offshore funds to meet the varied needs of investors.
You can read more about investing offshore in our Corolab guide, or by speaking to your independent financial adviser.
The information contained in this article is not based on the individual financial needs of any specific investor. To find out more, speak to your financial adviser.
Coronation is an authorised financial services provider.
*Returns are quoted as at end-August 2019. For more detail about this fund, please download its comprehensive factsheet here.