Tide turning?

Now is the time to re-enter the offshore investment markets, or so says Alan Greenstein, MD of Sasfin.

"With the rand at current strong levels and world financial markets in recovery mode, now is an excellent time to be looking offshore again.

There is a general consensus among economists and fund managers that the Rand's strength is probably overdone, and the currency will likely weaken moderately over the medium to long term.

"Returns from offshore funds have been poor over the last two years, due largely to the strength of the Rand and the downturn in the global financial markets, which reversed sharply in the latter part of 2003.

The outlook for the next 12 to 24 months is much more positive for global financial markets, while our view is that the rand is probably going to weaken from here.

With a reported 35 000 people taking advantage of the tax amnesty, many South Africans will want to reposition their offshore portfolios for capital protection and growth after several years of poor returns.

"Those who chose to pay the 10% levy and retain their assets offshore have come out of the closet, so to speak.

Whereas previously they might have been reluctant to switch out of poor performing investments for fear of drawing unwanted attention to themselves, this is no longer the case," says Greenstein.

"This is a good opportunity for them to reposition their investments to benefit from the current rally in offshore equity markets."

Greenstein says another point in favour of increased offshore weightings is the increasingly positive outlook for the global economy and financial markets.

The primary purpose of offshore investment should be to diversify one's portfolio against a downturn in any one particular market, and to gain exposure to shares and sectors not generally available in South Africa.

The Reserve Bank last year announced that asset managers can invest up to 15% of discretionary retail portfolios offshore, on much the same basis as is currently allowed for institutional assets, albeit subject to strict regulations.

This presented additional capacity for retail investors to diversify internationally via their asset manager.

Health warning: Speak to a specialist in this field, before investing. This article is not advice.