Offshore investing

How to diversify efficiently from South Africa

The poor performance of the rand is an ongoing concern for investors. Gaining offshore exposure is a good way to mitigate against the risk that a weak rand presents, but what is the best way to go about doing so?

South African investors looking to protect their investment from rand weakness will look to diversify their portfolio with offshore assets. Also, South Africa represents less than 1% of the global investment universe and, by diversifying offshore, investors gain access to companies and sectors not available on the local market. Expanding offshore lowers your overall risk, while increasing the potential for long-term returns. 

To gain international exposure, South African investors can invest directly in foreign-listed stocks or purchase rand-hedge stocks. Rand hedges are companies listed on the Johannesburg Stock Exchange (JSE) that tend to benefit from a weaker rand as they derive a considerable percentage of their profits from foreign markets and currencies. The likes of Richemont, Aspen, BHP Billiton, British American Tobacco, Glencore and Sasol, are widely considered to be rand hedges. There are pros and cons to investing in rand hedges versus investing directly in foreign-listed stocks that investors should consider. We have listed some of these below: 

Pros

Cons

Given these factors, on balance, we believe investing directly into foreign-listed stocks is an efficient way to diversify your investments. With investors being able to invest R1 million annually without the need for SARS clearance, and up to R10 million with SARS approval, exchange control is no longer a major consideration for the majority of South Africans. 

For those who don’t have the skill or time to pick individual stocks, exposure to foreign-listed stocks can be achieved by investing in offshore unit trusts via a locally domiciled platform, such as the Allan Gray Offshore Platform. Platforms offer convenient access to a range of offshore investment managers with one point of contact for the administration and ongoing management of your offshore investments.

The financial services, products or investments referred to on this website are not available to persons resident in jurisdictions where their availability or distribution would contravene local laws or regulations and the information on this website is not intended for use by these persons. This website is for information only and does not in any way constitute a solicitation or offer by Allan Gray Proprietary Limited or any of its associates or subsidiaries (collectively “Allan Gray”) to buy or sell any financial instruments or to provide any investment advice or service.

By selecting one of the countries below I confirm that I have read and understood the above and that:

(a) I am not a South African citizen; or 
(b) I do not reside in the Republic of South Africa; or 
(c) I am not otherwise a person to whom the communication of the information contained in this website is prohibited by the laws of my home jurisdiction; and 
(d) I am not acting for the benefit of any such persons mentioned in (a),(b) and (c) and 
(e) I confirm that any investment with Allan Gray is based on my own initiative and not due to any offer or solicitation by Allan Gray.