Investments

Looking beyond borders: Why South African investors are going offshore for growth and security

If you’re only investing in South African funds, you’re missing out on a world of opportunities. Global diversification offers a hedge against local uncertainty and rand volatility, encouraging many South African investors to now look offshore. They do this not just for wealth preservation, but also for higher growth potential that could help fund major life goals, such as their children’s education or a first home.

You do not need to live overseas to access offshore investment benefits. In the past, offshore investing had very high barriers to entry. Platform minimums were high and structures were complex, offering tax advantages only for high-income taxpayers. This priced young investors and middle-income families out of the market. But that’s changed. Young South Africans are increasingly looking offshore for their investment exposure. Through offshore investments, people of all ages can now access sectors and stocks that South African funds and local stock exchanges can’t offer.

Beyond Borders

Going offshore to achieve goals at home

If you’re investing toward a medium-term goal, like buying a new home or funding your children’s education, offshore funds are a compelling option. They offer diversification beyond the local economy, shield against rand volatility and unlock global growth opportunities not found on the JSE.

Another big consideration is inflation. In developed markets like the United States or Europe, inflation is generally around 2% or 3% per annum, whereas in developing markets like South Africa, annual inflation is double that: around 5% or 6%. While this makes some investments (like bonds) more attractive, as a South African investor you run the risk that your currency is losing its value twice as quickly as someone whose wealth is in dollars or euros.

The rand, like any emerging-market currency, is highly volatile and often weakens against major currencies. Holding assets offshore in stronger currencies helps preserve your wealth and purchasing power.

There’s also a tax advantage to investing offshore. Most offshore funds are accumulating funds, which means they don’t pay out dividends or interest to you directly. Instead, they reinvest their income back into the fund. This means that you don’t pay income tax or dividends tax; instead, when you sell units in the fund, you’ll pay capital gains tax, which is charged at a lower rate.

Looking for expert advice?

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Andries Maree
Sanlam Financial Planner
0828298251
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Managed Risk

A strategy for offshore risk

As with any investment, offshore investing carries some risk. While risk is an important consideration for investors, it can’t and shouldn’t be avoided. As an example, if you had taken a risk-on approach for the past two years, you’d be happier than if you’d adopted a very conservative strategy. The aim is to take careful, strategic risks, and to do it with the support of an expert who can help you navigate the market.

Glacier International, the offshore investment specialists of Glacier by Sanlam, gives South Africans access to direct international investments in multiple foreign currencies. Offshore portfolios are carefully constructed by expert fund managers, and the strategy is to hedge against inflation and currency volatility, and to manage macroeconomic risks.

Expert Guidance

Your guide in foreign territories

As a specialist business, Glacier International serves a range of investors – from sophisticated clients to those just starting in the investment world. You can invest offshore from a minimum of R5 000 per month, creating a space for middle-income investors seeking solutions and strategies tailored to big life goals.