Global fund: Why different currencies?

Dollars (Picture: <a href=\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\http://www.shutterstock.com\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\>Shutterstock</a> )
Dollars (Picture: <a href=\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\http://www.shutterstock.com\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\>Shutterstock</a> )
A Fin24 user has invested in the Coronation Global Managed Fund. She wrote:

I recently started investing in the Coronation Gobal Managed Fund in ZAR (rand). There was also an option to invest in the same fund but in USD (dollar). What is the difference?

Pieter Koekemoer, head of personal investments at Coronation Fund Managers, responds:


The differences between the two versions of the Coronation Global Managed Fund are about country of domicile and reference currency, rather than the economic substance of the underlying assets owned by the two funds.

Both funds will produce nearly identical returns over time and are aimed at meeting exactly the same long-term investor need of providing international diversification.

The US dollar-denominated version of the fund is registered in Ireland and therefore subject to European laws and regulations, while the rand version is "resident" in South Africa, which means that local laws are applicable.

In addition, the former will report returns in US dollars, while the latter issues reports in rands.

The key benefit of the Irish-domiciled portfolio is that it allows you to diversify sovereign risk in addition to economic risk by moving your assets to an external jurisdiction not subject to rules made by the local government.

The key benefit of the rand version of the fund is ease of access, as it is much simpler to transfer funds into and out of the fund when you only need to use the local banking system.

It is also important to note that all South Africans, individuals and corporations alike, are still subject to exchange controls.

When you invest in the rand version of the fund, you use Coronation's offshore investment capacity, while you use your own foreign investment allowance to invest in the offshore domiciled version of the fund.

The latter route requires a bit more administration as you need the South African Revenue Service's approval before you can take money offshore.

Because of exchange control and cross-border banking implications, the offshore version of the fund is only available for lump sum investments of $15 000 or more, while the rand version of the fund can be accessed by debit order from as little as R500 per month.

- Fin24

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