An opportunity?

(29.7.04) There is consternation about the value of the local currency and its volatility, says Denzil Burger, from Old Mutual Asset Management, and its effect on investors and their investments.

He maintains that perhaps now is the time to take stock. Investors thinking in dollars have seen positive returns, while their counterparts thinking in rand terms would have seen negative returns.
 

He touched on the importance and need for geographical diversification, while commenting on the fact that being offshore does reduce the emerging market risk, while having a positive effect on and reducing currency risk, he stressed that the offshore investment option would provide investors with increased investment opportunities.
 

Burger maintains that offshore investing can provide an overall smoother ride. One would expect that if an investor had half of the investment capital offshore and the remainder onshore that the returns would average out.
 

“In fact the volatility of the total investment was significantly lower that the individual components,” says Burger.
 

He maintains that investors should not be looking at the last three or four years worth of data or returns. OMAM did some research, based on 34 years of data.
 

The case for offshore assets remains strong he says, and they shouldn’t react to recent poor performance by cutting global holdings.
 

Burger: “Take stock, and consider using the buying opportunity which has been created by the currency’s current strength.
 

“Our research shoes that an offshore bond exposure may well be a better diversifier than offshore equities, over the long term.”
 

Health warning:

Get professional advice if you don’t operate in this sector. Don’t be afraid to ask a colleague. Do the analysis, needs and otherwise.