Investing Offshore - July 2016
In previous offshore-themed issues, we have argued the benefits of increased offshore allocations for most long-term investors. Today, as a consequence of the increased popularity of multi-asset funds, the majority of South African investors’ asset allocation has shifted somewhat in favour of offshore assets. However, investors should take note that these funds are typically limited to 25% offshore exposure which, depending on their specific circumstances, may not be enough.
Significant rand weakness since 2011, combined with fuller valuation levels especially in higher-quality developed market shares are supportive of a narrower future return gap between local and offshore equities. However, the heightened levels of economic and political uncertainty in South Africa at present supports the retention (in portfolios) of adequate hedging against potential future currency shocks. We therefore continue to argue for offshore exposure in line with a strategic allocation target specific to each investor’s needs. Despite heightened global uncertainty caused by a combination of low growth, an ongoing and unprecedented monetary experiment, and increasing political instability as evidenced by events such as Brexit, we remain convinced that equities is the asset class most likely to protect the purchasing power of investors over time.
In this issue we look at the strategic reasons to invest offshore, revisit our global investment philosophy and approach, as well as discuss the current positioning within our multi-asset international funds.