Our offshore exchange traded funds (ETFs) offer rand-based exposure to offshore markets and are a sophisticated, cost-effective option for South African investors to accumulate wealth, even as the twin shocks of market volatility and rising inflation play out around the world.
Is it a good time to consider offshore investing?
In periods of market uncertainty, like we find ourselves in now, there are significant opportunities for investors who are able to continue contributing to their investment portfolios, irrespective of market turmoil. Consistency, not trying to time entry and exit points, is key to growing long term wealth.
We cannot comment on the benefits of offshore equity exposure without first distinguishing between saving and investing. Saving constitutes putting money aside for a rainy day; investing is about building wealth over the long term. If you invest consistently then your entry and exit points become less relevant over five- to 10-years; there will be times when you buy bargains and times when you buy more expensive exposure – the important thing is to start your investment journey.
Providing diversification and rand hedging
Diversification and rand hedging are often flagged as the main motivations for gaining offshore exposure. Rand hedging means protecting your wealth from declines in the rand versus other currencies like the dollar, euro or pound. If the rand weakens, your portfolio returns are enhanced through exposure to offshore ETFs.
To get proper diversified offshore exposure, you need to access investment products that provide real exposure to global companies that offer completely offshore revenue streams. For example, the Satrix MSCI World ETF offers exposure to mainly developed markets, and predominantly the United States. The Satrix MSCI China and Satrix MSCI India ETFs give investors access to the ‘rise of the East’ megatrend that will play out over the next decade.
Additional Satrix ETFs to consider include: Satrix MSCI Emerging Markets, Satrix MSCI Emerging Markets ESG and funds linked to the big mega trends playing out globally: Satrix Healthcare Innovation Feeder ETF, Satrix Smart City Infrastructure and Satrix Global Infrastructure.
Our basket of global ETFs are all locally listed and traded, paying rand denominated returns on price movements in offshore markets. Each of our ETFs feed into the iShares product universe – iShares is the world’s largest index provider with the necessary scale to transact across all markets.
Balancing offshore and local investing
One of the frequently ignored considerations when investing is to match assets with liabilities. Most local investors have rand denominated liabilities in the form of home and vehicle loans and cost of living expenses. In this context, it makes sense for you to have a healthy skew towards rand-based investments. There is merit in having a combination of rand denominated investments and offshore investments, with the beauty of our global feeder ETF range being that they offer offshore exposure that delivers returns in rand – meaning you don’t have to repatriate offshore returns at a high cost.
Financial advice remains key
Although digital investment platforms make it easy to gain offshore exposure through accessing our global feeder ETF range, investors should consider consulting with financial advisers to ensure that their balance of onshore and offshore exposure is optimal.
Nico Katzke, Head of Portfolio Solutions at Satrix says: “ETFs should not be seen as an alternative to financial advice. Intermediaries play an important role in providing guidance as to which combination of ETFs make sense, because it can be a daunting task to pick the funds that suit your risk profile and tie in with the rest of your investment portfolio”. He adds that retail investors should question their intermediaries about the cost-effectiveness of ETFs in achieving liability-matched, offshore diversification.
How to Invest
Existing investor: Log in to your SatrixNOW account.
Satrix Investments (Pty) Ltd is an approved FSP in term of the Financial Advisory and Intermediary Services Act (FAIS). The information does not constitute advice as contemplated in FAIS. Use or rely on this information at your own risk. Consult your Financial Adviser before making an investment decision.
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