‘Smart money’ heading offshore, says AMM

Trend-spotting investors who go where the smart money goes could soon be heading in just one direction – offshore.

The heads-up comes from Absa Multi Management (AMM), a leading ‘manager of asset managers’ that scrutinises investment fund behaviour at both the major investment houses and the nimble investment boutiques that are often under-researched by financial sector watchers.

“Some investors seek profit by rapidly latching on to trends, especially trends involving ‘smart money’ placed by major institutions,” notes leading AMM analyst Miranda van Rensburg.

“The latest trend relates to prompt action by some pension funds looking to take advantage of changes to prudential investment guidelines following the increase in offshore investment allowances.”

The offshore allocation for retirement fund assets was previously capped at 20%.

“Changes to prudential guidelines announced by the Minister of Finance mean the new ceiling is 25% of total assets,” says Van Rensburg. “A number of asset managers have taken advantage of this and have increased the offshore exposure in their portfolios to the maximum. This is partly due to a strong rand that is bound to depreciate at some stage.

“This seems to be a major hint to South Africans that now is a good time to consider their international options, especially if they have made no offshore provision in the past.”

Van Rensburg says the JSE has delivered good returns for the last two years. It bottomed out in March 2009 at 18 000 points and by February 2011 was past the 33 000-mark. However, some market watchers now believe better value can be found in selected offshore equities.

“Markets are uncertain and no one knows for sure,” she adds. “But institutional appetite certainly seems to be a hint that it’s a good time to review allocations.”