There are many different opinions on this but we think as a starting point it makes sense to flip this question around – ask yourself what percentage of your wealth you would invest in South Africa if you were a foreign investor located in the USA or Europe? Even if we didn’t have our current political and economic problems, the percentage would more than likely be in the single figures.
South Africa represents just under 1% of the world economy and this is closely mirrored in the market value of shares on the JSE. Diversification in investing is often said to be the one free lunch and therefore, when the opportunity for diversification is available it should be taken. South Africans are entitled to invest R 10 million per calendar year offshore with a tax clearance certificate and a further R 1 million per annum using their single discretionary allowance. This does mean that exchange control is really not an issue for the great majority of South Africans (a married couple can invest up to R 22 million per annum offshore) and this is an opportunity that should be taken advantage of.
Based on the fact that the retirement funds you are possibly invested in are limited to investing 30% of their investments offshore, any discretionary funds you have to invest should have a higher offshore weighting. The exact percentage depends on specific circumstance but on an overall basis we are of the opinion that a least 50% of your total investments (retirement plus flexible) should be invested offshore either directly (preferable) or via an asset swap rand based offshore fund.
Should you wish to discuss this further please do not hesitate to contact us.
