Go global or go home

Many industry experts agree that now is a good time to invest internationally. Relative returns from global investments over the past 10 years have typically not been good, but expectations are that the next decade will see a reversal of this trend. Val

Europe, as a region in the spotlight at the moment, still has many challenges to overcome. Political uncertainty generally does not have a positive effect on growth assets such as equities. However, the prevailing political situation has little bearing on how asset managers assess their portfolios over the long term. If the markets have priced in the uncertainty – and the consensus is that the European market has – then there is typically value to be found in well-managed, quality companies.

In addition, many European-based companies have diversified to the extent that most of their earnings are derived from activities outside of Europe anyway. How well a company is managed matters more than where it is listed.

Buying and holding good quality companies offers inflation protection and the chance to grow your capital over the long term. Diversification always has been, and remains, a key reason to invest offshore. It opens up access to many more top fund managers and a much wider universe of investment options, geographic regions and sectors from which to choose.

Another key reason favouring offshore investments at the moment is the fact that the rand is generally considered to be overvalued currently, providing an opportunity to seek out international opportunities at a favourable price.

Investors are often uncertain regarding the ideal percentage of the portfolio to invest offshore. The answer is simply that it depends on the investor’s individual circumstances. For example, are you planning to retire to a foreign country or do you have children studying overseas? If this is the case then you would probably have a higher allocation to offshore assets than an investor who was simply looking to diversify a portion of his assets offshore.

The debate around whether to invest in developed or emerging markets remains an interesting one and there are widely differing viewpoints on the topic. It’s important to remember though that one can still obtain emerging market exposure via a company listed in a developed market that receives some of its earnings from emerging market countries.

For investors who are daunted by the many choices available, Glacier International – a division of Glacier by Sanlam – has launched “Navigate by Glacier International”, a range of carefully selected funds across different investor risk profiles.

After completing a risk-profiling exercise, investors are placed in one of three risk profiles (cautious, moderate or aggressive), each of which has a list of five or six funds from which to choose. All are daily traded, actively managed funds which simplifies choice, administration, and ensures liquidity.

The Navigate range of funds is offered as an investment option within the Global Life Plan, thereby giving investors all the associated benefits of investing within a life plan. Due to the structure of the investment, no tax is incurred within the plan for any income (interest or dividends) or capital gains.

There are estate planning advantages too. By investing via an offshore life plan issued by a South African life company, investors ensure that the investment forms part of their South African estate, thereby avoiding the complications of having part of their estate located offshore.

When it comes to investing offshore, the standard investment principles should apply – review your portfolio regularly and ensure you understand what you’re investing in, even if it’s in a foreign country.