R1m investment battle: Heystek and Viljoen’s offshore vs JSE showdown after four-and-a-half years

Offshore versus local investing goes head-to-head in this gripping real-money showdown between Magnus Heystek and Piet Viljoen. Four and a half years after the challenge began, the results are sparking fierce debate about political risk, market timing, diversification and South Africa’s undervalued stocks. With millions at stake and emotions running high, both investment heavyweights reveal the hard lessons learned, why sentiment drives markets, and whether South African equities still offer the best long-term returns despite the country’s economic and political turmoil..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..Watch here.Listen here.Edited transcript of the interview.Alec Hogg (00:00:08)Four and a half years ago, a member of the business community said they were sick to death of the debate that was always going on about local versus offshore, and so they wanted to put it to the test.Well, they couldn’t have chosen a worse time if you were betting for the offshore side, because November 2021 was just about the peak of the global market, the global tech markets, and into that difficult situation walked Magnus Heystek.And as a consequence of that, though, you’ve got to give him some credit. The portfolio took an awful hiding. He’s been very transparent and has conversed with us throughout this series, saying, “Mea culpa, I’ve learned quite a lot from the process.”Anyway, he’s in the black. That half a million rand he was given is R629,000, as we said. Way in front is Piet Viljoen, who’s focused only on the local side: R809,000 from the R500,000.And we’ve got six months to go. So in the absence of a catastrophe locally, it looks like Piet is home and hosed.We’ll find out what the two gents themselves think about it. Good to see you. I’m glad you guys are pals and get on, and you’re not at each other’s throats, because this has a possibility of turning very nasty.You’ve got Magnus, who probably feels hard done by given the timing of the competition, and Piet, on the other hand, who probably feels hard done by because everybody says take your money offshore if you’ve got any chance.There are going to be a lot of learnings though. You’re dealing with real money. You’re doing it in the public environment.Magnus, I know you’ve been transparent, refreshingly so, and saying you panicked a little bit here and then you changed things in that. But if you were to give us the one big learning that you got so far with six months to go out of this competition, you can pass on to the millions of Business Tribe members, what would it be?Magnus Heystek (00:02:23)Well, first of all, hi. Good morning, Alec, and good morning, Piet. I hope you guys are well.Investing is how you deal with risks, and the risks are unpredictable.When we started the investment, if you go back ten years up to that point, it was a no-brainer. You should have put your money offshore.But investment markets can sometimes teach you a lesson.And you’ve said already that at that point the rand suddenly strengthened and the offshore markets took a hell of a dive. It was not a great time to start this competition.The second mistake I also made is I became very emotional and I made some amateur mistakes. I tried to time the market.So the market timing is a very big issue. A lot of retail investors try to time the market, and I get so many emails and phone calls saying, “I want to invest money now, but when is the right time?” And you simply don’t know.And we saw last year, for instance, the beginning of the year we had the Trump tariffs, and that smacked the dollar price, and the gold price rocketed, commodities rocketed. And last year was a phenomenal year for the JSE.So you couldn’t predict that. That was not in the charts. It was totally, totally - it just happened. And that’s what markets are like, and you’ve got to stick to your plan.Just one correction, Alec: the current value on the offshore portfolio is R685,000 this morning. So there’s been a very nice recovery in the markets.I mean, believe it or not, April, despite the war in Iran, there’s been a phenomenal year.There’s another lesson. If you look at the headlines going back to February when the war broke out in Iran, every headline was, “Markets are going to crash, take your money out.”And we had the best worst month in five years in global markets.So investors need to learn to not be emotional. It’s a long-term game. And once you’ve established a portfolio, you need to stick with your risk profile and let the markets do what it does.And also that the advisers or the fund managers, they must do their thing. Don’t try and be smart, because there are millions of people out there much smarter than the average investor.So those are the lessons.So since I sat down, relaxed, credit my portfolio, gave some money to Anthony Ginsberg, who runs the Megatech Fund, Sean Peche, who runs the Ranmore Fund, and then I put some money into gold and Japan. The portfolio has done exceptionally well.In fact, from its low when the fund was at $20,000, it’s actually doubled to $40,000.So, you know, just stick to your plan. The markets will look after you.Alec Hogg (00:07:00)Piet, you have had a stellar performance just based on discipline.Magnus is maybe, maybe just a bit of mea culpa here.Many years ago, when we had a radio show, I was asked to play in futures, which I know nothing about and still don’t know nothing about. And I quickly lost just about all the money that had been put up by the sponsor.And then Arthur Buchner, who was our advisor and was a futures player, he actually not only regained all the money I lost so quickly, but added to it.And I think it shows that being on the outside - I don’t mean any disrespect to you, Magnus - but you have to look after emotions, you are looking after the psychology of your clients.There’s a whole lot of other things that come into play.With Piet, hopefully all you look after is the focus on growing money and being an asset manager.I learned that from that little competition that we had on the radio, and I think we are seeing this working right now.When you’ve got a plan, as Magnus mentioned, and you stick to it, as you have Piet, even though four and a half years ago many people would have given odds against you outperforming, you have, and quite some.Piet Viljoen (00:08:29)Yeah. Look, the reason I was willing to take the bait four and a half years ago, because at that time the anti-South African investment voices were very, very strong.There was a lot of negative emotion around the South African investment environment, the country, GDP growth, unemployment, all that sort of things.But my view was that those negative views were more then priced into the market. And that is exactly how it has panned out.So my view is based on the work of three guys, Dimson, Marsh and Staunton. They do an annual investment yearbook where they look at the returns of different markets in the world.And they went back to 1900. I know the past 125 years, from 1900 to 2025, the best performing market in real currency adjusted terms is the South African equity market.Over the last 25 years, one of the best markets in the world, in real currency adjusted terms, is this African stock market.And over the past five years, or four and a half years, I think this exercise has also shown that the returns available from this market are high.Dimson, Marsh and Staunton also said there is no correlation between GDP growth and stock market returns for any market.I mean, you can look at China. China has probably had the highest GDP growth in the world for the past 30 years, yet the investment returns from that market have been disastrous.Conversely, South Africa is poor economic growth, high unemployment. Yet our stock market remains one of the best performing markets in the world.And the reason is very simple: low GDP growth, high unemployment, and those macro factors weigh on sentiment, which gets priced into the market.So there’s a high risk premium on South African assets. And by buying South African assets, you earn that high risk premium.You earn those high returns because of the pricing of the assets.So you have to disentangle sentiment, which is what Magnus talks about when he talks to his clients. He needs to comfort them.The best way to comfort at night with negative sentiment around South Africa is to take the money offshore. It’s like buying an insurance policy.Are you comfortable in living in your house when a storm comes and the roof blows off because you’ve got an insurance policy that will fix it for you, but that insurance policy costs money.Taking your money offshore costs you money. And that money in terms of investment is lower returns, and you can get higher. It’s more comfortable, but it costs you money.And that is the lesson from Dimson, Marsh and Staunton’s work.Alec HoggPiet, explain PE ?Piet Viljoen (00:13:42)PE is simply you take the current earnings of the company and you compare that to the value, the price of the company.So if the price of the company is ten rand and it earns one rand per share, the PE is ten times one rand earnings.If you invert that, the earnings yield - one rand of earnings on the price of ten rand - there’s a 10% earnings yield.That’s what you’re earning by basing a company with a PE of ten; you’re earning 10% on your capital.If it grows, you earn that 10% plus any growth.So essentially, if a company is on a price-to-earnings ratio of five, just for argument’s sake, and there are some on the Johannesburg Stock Exchange priced like that, you are getting a 20% return on your investment in that company in what the company is generating in profits, if it just stays still. Magnus Heystek (00:16:26)The big issues are the political risk, or the interpretation of political risk, and that you cannot ignore in our markets.And I’m not aware of those long-term studies, and it is absolutely true. The JSE was driven by gold, platinum and diamonds.But things have changed since 2010. Up to 2010 the numbers were correct.But if you take the 15-year period, South Africa versus the rest of the world has not done well. Ten years, 15 years, seven years, five years - it has done okay.Last year it did exceptionally well.But you must remember, if you compare it, which markets are you comparing South Africa to? Emerging markets, world markets, S&P 500 or Nasdaq?If you take the Nasdaq as an example, if you were an aggressive investor and you wanted exposure to the Nasdaq, which has been a phenomenal place to put your money for the last 15 years despite volatility, South Africa simply did not offer you any exposure into the Nasdaq.And maybe indirectly through Naspers, and that’s a very big risk, only one share.The big issue is that the JSE has been shrinking in terms of the number of listings.Everything he says is correct, but it does not answer the question of political risk, which is always very prevalent in the markets.And I can only speak from what I’ve seen. Since 2010, when allowances were increased to R10 million per person per year, 1.2 trillion rand has left the country through Reserve Bank approval.That’s why Piet is complaining - there’s no money invested in our local market.Investors, large and small, have decided they are safer with their money offshore.So that’s a massive amount of money that has left the country.Last year alone, 160 billion rand left the country through these channels.And every big institution in South Africa - whether Discovery Bank, Standard Bank or Old Mutual - have offshore channels or offshore partnerships.And that is what the clients prefer. They want their money offshore against political risk or perceived political risk.So that’s the first point: political sentiment amongst retail investors is extremely negative.And I probably would not have had a business like we have today if I kept on saying stay in the market. Clients simply are not interested. They want their money offshore.Piet Viljoen (00:21:57)Look, I agree with Magnus. I agree the sentiment is super negative. I agree money is flowing out.That is the reason why this is a GP and why the returns are high.So it’s a bit of a chicken and egg situation. It’s very lucrative to move clients’ money offshore. It’s a good business to be in.So there are numerous advisers. It is in their financial interest to spread these stories about how bad things are.And that plays to the market. The market wants to hear it.And that is fine. That’s a business.I also agree you cannot have all your eggs in one basket. It would be stupid to have all your money in Africa.But you have to realise the money you take offshore is your insurance policy against political blundering.But like any insurance policy, you pay a price for that.And insurance policies are normally grudge purchases.But the way the advisory industry has painted the situation is that it is actually to your benefit to take money offshore.And it isn’t. The numbers prove that you earn poorer returns.Yes, you can pick out certain markets that have been better, but on average South Africa has done better than the average market in the world.And I said, if you are brilliant, you can pick that market over that market. Maybe you will do better. I don’t know.All I can say is on average returns are better in South Africa.Moving money offshore gives you comfort. You pay a price for that comfort.But yes, have money offshore. It is an insurance policy.I have money offshore, but a lot of my eggs are here because this is where the returns are.Magnus Heystek (00:27:32)Yes, absolutely correct. But remember when we talk about offshore investing, we are talking about discretionary money.There is still a lot of money being managed by companies like Allan Gray that has to remain in South Africa in various Regulation 28 funds, living annuities, provident funds.We make use of local funds - we use these funds, we use 36ONE funds, we use all the local funds.We cannot take money offshore, and we don’t want to.The returns have been excellent.I think local advisers were initially very reluctant to take money offshore.When I started recommending this on radio programmes and columns, I got flak from colleagues.But if you look at the returns of technology funds, especially things we don’t have in South Africa, we do not have a technology sector where you can invest in technology funds.The technology funds we have been using for 15 years have created enormous wealth for our clients.I mean, the last 15 years - anything related to the internet and technology - the returns have been stupendous.You could not get those returns in South Africa. You had to take your money offshore and put it in a fund in Guernsey via various platforms or ETFs.Piet Viljoen (00:30:13)Very simply, the value fund has performed in line with my expectations.It has outperformed the MSCI World Index.You don’t need growth for good returns.These stocks are priced on earnings yields of 15% to 20%.Things can go sideways, as they have for the past five years, and you still make good money.But you do need offshore diversification. It is important.But realise you are paying a price for it.Alec Hogg (00:31:59)I like that. I like the way both of you have framed the competition and what you’ve learned from it.The lesson for all of us is: get a plan and stick to it.Be careful to be buffeted by the winds.As Warren Buffett would say, when you make a decision in investing, have an average holding time of forever.Now of course that doesn’t always work out.But at least if you know what you are following, Piet’s logic is clear -15%, 16%, 18% returns from solid companies.Magnus’s view is also clear - political risk in South Africa means you need offshore exposure.The question is how much you put in each side.That is the question we are going to ensure they give us a full-on answer to when the competition ends.We might also be asking them for a rematch.

R1m investment battle: Heystek and Viljoen’s offshore vs JSE showdown after four-and-a-half years

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