2016 Investing Offshore - July 2016
Frequently Asked Questions - July 2016
HOW TO ACCESS OUR INTERNATIONAL FUNDS
Our rand-denominated international funds are available directly from us, or as investment options on the product platforms of most of the prominent linked product companies in South Africa. Our foreign-domiciled funds can also be accessed directly, or through the offshore fund platforms offered by Alexander Forbes, Allan Gray, Cidel, Glacier by Sanlam, Investec, Momentum and Old Mutual International.
CHOOSING BETWEEN A RAND-DENOMINATED AND FOREIGN-DOMICILED FUND
Our rand-denominated and foreign-domiciled international funds are invested in exactly the same assets. The suitability of fund structure is best determined by an investor’s financial and tax planning considerations. Factors such as the investor’s status (natural person or trust); family needs (for example children on different continents) and the purpose of their investment (for example, whether they want to draw an income) should influence this decision.
Offshore investment is still subject to exchange controls set by government and administered by the South African Reserve Bank. When you elect to invest in our foreign-domiciled funds, you use your individual allowance of up to R11 million per annum. Investors in our rand-denominated funds utilise Coronation’s foreign investment allowance, which is currently set at 35% of the household assets invested in our unit trust funds. Note that we may have to temporarily close our rand-denominated funds to new investments in periods where we exceed the 35% limit.
DECIDING ON THE RIGHT CURRENCY CHOICE
Coronation believes the decision on the optimal currency allocation within a portfolio is integral to establishing the fair value of assets and optimising returns over time. Our long-term growth oriented foreign-domiciled funds therefore invest in a basket of currencies, despite the fact that returns are reported in US dollars.
However, where funds have short-term capital preservation targets, which can only be expressed in a certain currency, the currency decision is often more appropriately made by the client. For this reason, we have introduced hedged currency classes for the Coronation Global Capital Plus Fund. This enables investors to choose the reference currency which we will use in managing the risk of short-term capital loss. See Figure 5.