Your retirement money no longer needs a passport to travel

You can globally diversify your retirement by gaining exposure to offshore markets while still being part of a South African Retirement Fund.

If you already have some experience of investing, you may have wondered about offshore investments. Contrary to popular belief, holding money offshore is common practice and perfectly legitimate – indeed, if you have a retirement fund then it’s likely that you already hold some offshore investments in it, but is it enough?

“An Investor should invest a minimum to the equivalent to the percentage they import from outside of South Africa. For most South Africans this is around 45%”. Simon Fillmore responded when asked how much a South African investor should invest offshore at the 2022 GIB Investment Summit.

Here is an introduction to offshore investing and the main things to consider.

Should the definition of ‘offshore investing’ be challenged?

For an SA investor, an offshore investment is one that holds your money outside SA. It may be a fund that invests in foreign companies, or equally it may invest in South African companies that are registered abroad.

It’s not always easy to identify an offshore investment at first glance – for instance, a company may be physically based and registered in SA but may generate revenue from operations around the world.

Why invest offshore?

Investing offshore may enhance returns and reduce risk by diversifying exposure from a single currency or country. It can help to form a prudent part of a portfolio alongside local investments. The level of exposure depends on unique needs.

More investment opportunities: when you diversify internationally, you get access to a much wider range of investment opportunities to grow your money across countries, industries, companies, and currencies.

Reduce risk of capital loss: spreading investments across markets and currencies minimises the impact of currency depreciation or political and market events on retirement.

How are the risks of investing offshore managed?

The risk involved in any offshore fund depends largely on the companies in which it invests, and on the country where it is registered. Risk is controlled by compliance to regulation.

International regulation offers more safeguards to you, the investor. When you invest with a fund that invests in international companies or assets registered outside SA, you benefit from the protection offered by their more stringent regulations.

Is investing offshore right for me?

Investing offshore is more common than you might think – many Pension Funds and Investment Portfolios already have offshore allocations.

Historically, a portfolio made up of largely dependable domestic assets was ‘spiced up’ a little by adding a small offshore allocation. Unfortunately, the small allocation allowed by regulation could never fully take advantage of the diversification benefit available to global investors.

With the change in regulation a larger portion is now allowed which means that retirement investors can be more diversified across all economies thereby limiting their Geopolitical Risk. However, the change still “only” allows for 45% exposure by the definition to global markets outside of SA markets.

The Destiny Global Enhanced Portfolio

GIB has constructed the Destiny Global Enhanced Portfolio which is the next step in the evolution of retirement savings and offshore investing.

GIB will ensure investment of the maximum of the 45% offshore allowance and uses a selection process within the remaining South African Local equity component to invest in South African companies that generate a minimum of 75% of their revenue outside of SA.

The Global Enhanced Portfolio leverages the resources, relationships, and insights of the world’s best investment managers to help members achieve their global retirement objectives across most markets throughout the world.

Talk to your GIB consultant or financial planner to find out more about the Destiny Global Enhanced Portfolio.