Category Investments

Offshore holdings still too low says ACI

28 July 2006 Paul Dold

South African investors need to boost their offshore holdings and gain the benefits of diversification, says Di Turpin chief executive of the Association of Collective Investments.

The offshore content in portfolios still seems far too low and most
investors depending on their risk profile - can easily invest 30 percent in offshore markets.

Turpin says the diversification benefits bring lower portfolio risks as well as offering investment opportunities not available locally. In addition, going offshore offers a hedge again any further rand weakness.

Existing investors have already benefited from the Rands weakness since the last reporting period in March, pushing up the Rand value of their holdings substantially. The MSCI World Index increased by over 15 percent in rand terms in this quarter alone.

Domestic interest rates may also rise soon given the current account deficit and inflation prospects and this could to some extent in the short term slow local economic growth increasing the attractions of offshore markets.

Figures released by the ACI today show that retail investors channeled R1,1 billion into foreign equities in the June quarter, but this was down on the R1,6 billion in the previous three months. There was a small outflow of R124m (R484m inflow) from institutional investors.

The total net inflow for the quarter was R820m(R2,5 billion) after small outflows from both the fixed interest and asset allocation sectors.

Local investors now have 358 foreign currency denominated funds to choose from with total assets of R84 billion (R70,3 billion).

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