Investing offshore just became a lot easier

The past year’s dive-and-revive manoeuvre of the rand against the dollar has once again shifted the focus to the importance of appropriate offshore investments. It’s during times of currency volatility that the timing of going offshore becomes the focus point among investors. But at Sanlam Investments we instead focus on giving clients the right type of offshore investment and less on trying to time the transaction, as the case for going offshore is supported by several other factors other than the antics of our currency.

The timeless case for going offshore

SA represents only about 1% of global GDP. Investors picking solely rand-based local investments are therefore missing out on a multitude of global investment opportunities, including sectors that have zero presence in SA, such as aircraft manufacturing.

Diversification across sectors and geographies is crucial, as countries don’t experience their growth cycles in sync. While Brazil may be deep in recession, China is still growing rapidly, for example. Diversifying your clients’ portfolios across several economies is therefore a relatively easy way to smooth out returns, which is particularly relevant now as clients are harbouring anxiety around prevailing market volatility.

In addition, the rand is a structurally weak currency as our current fiscal situation does not bode well for the rand. If it continues to decline over the long term, offshore investments can provide excellent protection against rand weakness and volatility. This can prove especially useful when your clients are planning future international studies or travel, or perhaps an offshore retirement. More and more we find that established SA clients are looking outside the SA market to preserve their wealth – also for future generations.

But several obstacles await advisers offshore

According to ASISA, there are now more than 1 500 funds to choose from locally – already a substantial amount to research and monitor – but globally this figure stands at over 50 000!

Where does one start? A second – and perhaps the most challenging – obstacle is the regulatory impact of choosing offshore funds for your clients’ portfolios. Documenting the fund selection and rebalancing process adequately, and following TCF guidelines by, among other things, reporting frequently and clearly to your clients on their portfolios’ progress can be particularly burdensome in the international environment across regulatory jurisdictions.

This is why we’ve crafted an offshore consulting solution

For a few years now Sanlam’s multi-manager team has successfully been offering a local investment consulting proposition to ensure compliance with TCF, with risk-profiled solutions, which will ensure all clients are treated fairly. (Under TCF advisers are under pressure to ensure that clients with similar risk profiles share similar portfolio construction and investment outcomes.) This same proposition is now also available for offshore investing.

Says Rafiq Taylor, head of Retail Implemented Consulting at Sanlam Multi Manager, “We’ve modelled five risk-profiled solutions to guide the construction of tailored investment portfolios, appropriate for clients fitting a certain risk profile. This will mitigate inconsistencies in portfolio returns for clients with similar levels of risk, ensuring consistency and fairness. These ‘model’ portfolios are then implemented and closely monitored by a dedicated investment committee. In all of this we are assisted by the UK-based Sanlam FOUR.” (Sanlam Multi Manager also created five multi asset funds available in USD and GBP.)

Two multi-manager teams on the job

Sanlam FOUR is an offshore multi-manager borne from an SA company, with a similar process to its SA-based sister multi-manager. Over time Sanlam FOUR has created partnerships with global asset managers through joint ownership and strategic mandate allocation. Within Sanlam FOUR there is a dedicated Fund Solutions team specialising in risk-targeted investment solutions. The team has been established for over 15 years, with experience across a range of asset classes. It is this team that manages the offshore consulting solution range.

Clients and advisers benefit from specialist market insights and economic research undertaken by both Sanlam’s SA- and offshore-based multi-manager teams. Among other things, they perform detailed fund analyses to gain a thorough understanding of the drivers of performance in client portfolios, portfolio construction, tactical asset allocation, as well as risk management and compliance. In short, the multi-manager teams take care of not only portfolio construction for real returns, but also of regulatory requirements.

A key differentiator from competitors is that the Sanlam offshore consulting offering comprises of actual offshore managers, while its competitors mostly use SA-based asset managers with offshore offerings.

Offshore consulting solution packed with perks

The offshore consulting solution links the investment process to the adviser’s financial planning process, leading to real returns over specific targeted periods. The multi-manager’s tactical asset allocation process also assists the adviser with navigating uncertain markets. This way, some of the uncertainty in terms of meeting targeted returns are mitigated.

On a practice management level, the solution offers customised co-branded reports on an investment management and a client level, and client management becomes scalable via either a wrap fund or a fund of funds model.

But advisers have even more choice

Advisers who don’t want to make use of the full consulting proposition are also free to pick their own funds from Sanlam’s offshore equity capability for long-term real returns. These funds are available via the Sanlam Asset Management Ireland (SAMI) and Glacier International platforms.

They can of course also be used as underlying funds in the offshore consulting solutions. For example, a blend of the Sanlam Investment Management (SIM) Global Equity Income Fund (40%), the SIM Global Emerging Markets Fund (20%) and the Sanlam FOUR Stable Global Equity Fund A USD Acc (40%) offers an all-weather return relative to the MSCI global index.

A robust solution

When choosing our offshore consulting proposition, the outcome is a robust solution managed in a disciplined and cost-effective manner. Advisers will have peace of mind knowing that the end-to-end investment process is compliant, well-defined and well managed. They can also enjoy a real competitive advantage when it comes to proposing effective solutions, and will be distinctly differentiated from their industry counterparts.