At the INN8 Invest Summit 2024, Chantelle Baptiste, Equity Portfolio Manager & Head of SA Equity Research at Fairtree, joined a distinguished panel to tackle one of the most pressing questions facing South African investors: “Should I stay or should I go? Local vs Global Equity”.
Moderated by industry expert Andrew Cormack, the panel featured Abdul Davids (Camissa), Derinia Mathura (Melville Douglas), and Alastair Baker (Sarasin & Partners), who collectively shared their insights on the complexities of balancing local and global equity investments. The conversation was particularly relevant for those managing solutions for living annuities, where the choice between local and offshore exposure can shape long-term financial success.
The case for going global
For South African investors, diversifying wealth into offshore markets is a strategy often recommended to mitigate risks associated with local challenges such as currency volatility, political instability, and economic fluctuations. Although there’s no one-size-fits-all solution, international diversification can provide crucial exposure to stable currencies like the US dollar (USD), Euro (EUR), or British Pound (GBP). This helps preserve the value of wealth against the fluctuating South African Rand (ZAR), which often absorbs shocks from global economic changes due to the country’s commodity-driven economy.
Many financial advisors recommend that South African investors should consider allocating between 30% to 50% of their investment portfolio offshore. This can vary based on a client’s personal circumstances, asset and liability matching, risk tolerance, age, and financial goals. Moreover, offshore investments open the door to a broader range of opportunities, particularly in sectors like technology, healthcare, and consumer goods, where global markets offer more depth and liquidity compared to South Africa’s Johannesburg Stock Exchange (JSE). This broader access can drive stronger growth for certain portfolios.
Why stay local?
While offshore exposure offers growth and stability, there’s still a strong case for retaining a portion of assets in local equity. The JSE, dominated by resource-heavy companies, offers unique opportunities for investors willing to embrace the volatility and cyclicality of these industries. South Africa’s local market has room for alpha generation for those willing to take on more risk, especially when economic conditions favour commodity producers.
As the panel pointed out, the proportion of a portfolio invested locally versus globally should be tailored to each investor’s circumstances, risk tolerance, and financial objectives. Conservative investors may prefer a greater share of global assets, while those with a higher risk appetite might find opportunities to capitalise on local market movements.
Regulatory considerations
One of the unique challenges for South African investors looking to diversify offshore is navigating exchange control regulations. As the panel highlighted, South Africans can invest up to R1 million per year without South African Reserve Bank (SARB) approval, with the opportunity to increase this to R10 million annually with SARB approval. These limits are essential to consider when planning international investments.
Tailoring your strategy with Fairtree
Ultimately, the answer to whether you should focus more on local or global equity depends on your personal financial journey. Fairtree is well-positioned to assist clients with both local and offshore equity, thanks to our experienced investment professionals and a robust track record across various market environments.
Whether you’re looking to hedge against local risk by diversifying offshore or seeking alpha in South Africa’s dynamic equity market, Fairtree’s tailored strategies and deep expertise make our funds a building block in any investment solution.
