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How much to invest offshore?

30 Oct 2019

By Vimal Chagan, Liberty's Divisional Executive for Retail Savings and Investments

Many South African investors are looking to international markets for improved investment returns. This need for offshore diversification is mainly driven by the low level of growth the economy has delivered over the last five years.

While lifting business confidence and improving gross domestic product (GDP) growth is a top priority for the South African Government, unfortunately, the remedial action taken by government will take a long time to yield positive results.

South Africa accounts for only 0.4% of global GDP and yet our equity market capitalisation makes up more than 200% of our GDP, the highest proportion in the world. This is unsustainable, and investors should consider diversifying their portfolios to include other asset classes like offshore to ensure a decent real return after inflation. Offshore  diversification gives you the opportunity to take part in the other 99.6% of investment opportunities outside of South Africa. But how do you go about doing this? 

Investing offshore is not without risk and is dependent on a variety of factors like your risk profile, investment objectives and investment term. You also need to fully understand how much risk you're willing to take when investing globally.

What is your risk appetite?

Here is a guideline of the optimal mix for offshore exposure based on your individual risk profile. The risk profile examples below outline the optimal combinations of domestic and offshore exposure. The guideline mix of assets for the different risk profiles are based on a balanced global portfolio of 60% equities, 25% bonds, 10% property and 5% cash.

Conservative

Moderately conservative

Moderate

Moderate Aggressive

Aggressive

94% Domestic
6% Global 

84% Domestic
16% Global

79% Domestic
21% Global

67% Domestic
33% Global

60% Domestic
40% Global


Liberty's solution to grow or preserve your investments

The launch of the Liberty Advanced Global Equity T3 Portfolio gives you a vehicle to grow or preserve your investments through offshore exposure.  We recognise that high net worth investors require access to offshore markets with minimal currency risks.

This portfolio allows greater flexibility to achieve returns based on the movement of offshore indices. It provides a guaranteed minimum return if the markets go up and ensures protection of the initial invested amount should the markets go down.

How the Liberty Advanced Global Equity T3 Portfolio works

Between 7 October 2019 and 29 November 2019, individuals, companies and trusts with natural beneficiaries can invest a minimum of R250 000 in the portfolio. Lump sum investment amounts of more than R1 million will receive an Allocation Enhancement of 1% on the lumpsum investment amount. Investment amounts larger than R3 million will receive an allocation enhancement of 2%.

The investment amount plus the Allocation Enhancement, less the Initial Advice Fee will be invested in the Liberty SP Holding Fund until the Strike Date (6 December 2019). Policyholders will receive the return of the STANLIB Money Market Fund (net of tax) while invested in the Liberty SP Holding Fund.

The Liberty Advanced Global Equity T3 Portfolio’s underlying basket is weighted 50% to the S&P 500 and 50% to the Euro Stoxx 50 capital indices. Investments and returns are unaffected by currency fluctuations.

Part of the appeal of this portfolio is that you get at least your allocated capital back after five years regardless of market performance. The promised portfolio pay-off and guarantees are net of all charges and tax and what you see is what you get.  If you do however need to withdraw before the end of the five-year term, you'll get the market value, but your capital isn't guaranteed.

To find out how you can invest in this portfolio, speak to a Liberty Financial Adviser or your Broker today.

Liberty Group Ltd is the Insurer of the Liberty Evolve Investment Range, and an Authorised Financial Services Provider (FAIS no. 2409). Terms and conditions apply.


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Liberty Group Limited (Reg. no 1957/002788/06) is a registered Long Term Insurer and an Authorised Financial Services Provider (FAIS no 2409).

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