Johannesburg, 21 February 2022, South Africans are looking beyond the sea when deciding where to put their cash and a multi-asset global note is becoming a more popular choice.
“What makes offshore investing so attractive is that no matter where the Rand stands against the dollar or how it fluctuates, investors are still able to look at a conservative 8% year-on-year dollar based return.,” says DwayneDe Waal, COOfrom diversified asset and fund management firm, Aluma Capital Investments.
Many South Africans are sitting with a lump sum of cash from retrenchment package and life insurance policy pay-outsthat have been made since the onset of the Covid-19 induced pandemic and are looking at ways that their money is working for them.
In May last year Liberty Insurance published figures showing a spike in retrenchment claims peaking to over 60 per month between August and October the year prior. The average number of claims for the same period a year prior was 10 per month. The insurance company also saw a 200% spike in mortality claims between June and September 2020.
“This money cannot sit in a bank, it will lose its value,” says De Waal.
He adds that even though the Rand has a tumultuous relationship with the US dollar, that offshore investments, especially if they come with capital protection, often present a better investment opportunity. The rand was at 13,40 to the dollar 5 years ago and now it’s at 15,40 to the dollar. That’s a 15% devaluation over the last years on the currency alone.
“Multi-asset global notes can also be paired with the ability to give a client a gearing with a bank guarantee they can earn potentially returns north of 20% with no capital risk,” he adds.
Investors are also eyeing the States and its economic rebound post COVID that can benefit investors.
But, it’s not just the opportunity that has become more popular it’s how investors have changed. “The days of sitting with your broker and filling in tons of forms are coming to an end, investors have more information and want more control of their finances,” he says.
Many companies in the financial services industry have streamlined the investment application process and anyone looking to invest offshore can simply go through the process online. No exchange control is required to invest in these offshore notes.
In addition, anyone needing liquidity can borrowagainst their offshore investment. “If there is a cash need, an investor can borrow against it at prime or prime-1%, making it a cheaper debt vehicle,” says De Waal.
De Waal says that this is not the only option offshore available. “For people who are unsure of investing offshore, I strongly advise that a product that protects the value of the capital is chosen,” he says.
He adds ,if someone needs an income from their investment , that a fixed income product is a far better option than seeing your money being eaten up by bank charges , devaluation , inflation and depreciation.