How to ensure offshore exposure

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A Fin24 user wrote to ask in which products he should invest in order to ensure offshore exposure.

Dr Chris van Wyk of PSG Hermanus Portfolio Management & Stockbroking responds:

Investors seeking offshore exposure will find useful pointers to product selection by first:
  1. Clarifying objective(s);
  2. Determining a time horizon for the investment;             
  3. Deciding whether money will be taken out of South Africa permanently;
  4. Becoming fully acquainted with relevant foreign exchange control regulations;
  5. Gaining insight into relevant tax considerations;
  6. Assessing their risk tolerance and
  7. Identifying appropriate asset classes.
For the vast majority of investors arriving at appropriate decisions implies involving a competent investment adviser/portfolio manager/stock broker of repute.

Having clarified these matters, the options are:

1. To transfer investment funds offshore permanently within the framework provided by the South African foreign exchange control regulations.

The appropriate products would be either a bespoke portfolio of offshore listed securities or a range of unit trusts or a combination of these products.

The selection of appropriate shares for your portfolio or range of unit trusts would require access to investment research and experience, which your investment adviser should be able to provide.

Direct investment in offshore immovable property could also be considered.
 
2. Invest in so-called rand-denominated offshore unit trusts:

These are offered by a number of South African asset managers.

Your investment adviser/portfolio manager/stockbroker should be able to assist you in arriving at appropriate selections.

Funds invested in this manner will not end up being permanently offshore and liquidating your investment will take place in rands.

In many cases investors prefer to acquire investment exposure to non-rand currencies by investing in listed so-called rand hedge securities.

Such securities are listed on the Johannesburg Stock Exchange and, in most cases, also on an international stock exchange.

Your portfolio manager should be approached to construct and manage an appropriate portfolio of rand-hedge securities if you should decide to opt for this alternative.

- Fin24

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