Biznews founder Alec Hogg is joined by Warwick Asset Management’s head of investments Adrian Meager, fixed interest chief Sidney McKinnon and portfolio manager Thomas Blamey. They’ll focus on how you as an investor can invest offshore, and why you should be diversifying.
Stuart: Good morning, welcome to the Warwick presentation. We’re going to be looking at offshore investing. Just before we get started, my name is Stuart Lowman, I’m the managing editor of BizNews. If you can give me a show of hands if you can hear me and see Alec and the Warwick team.
Warwick: Yes, we can hear you.
Stuart: Thanks guys, and to the listeners there’s a little hand option, it’s a virtual hand but if I see a few hands raised then I know that you can hear and see us. Okay, there we go. Excellent, they’re coming through. As we go through the presentation one of the key things is to keep it interactive so there’s a little questions bar on the control panel on the right-hand side, if you can click that dropdown menu and pop your questions in there – Alec and myself will pass those onto the Warwick team and we’ll get them to answer as we go along. Over to you, Alec, to get things started.
Alec: Thanks, Stu. Now that we’ve got all the technical stuff behind us it’s a warm welcome to this sponsored broadcast that’s coming to you from London where I am, and CT where the Warwick team are. From left to right, Sidney McKinnon. Sidney, what do you look after or what is your area?
Sidney: Thanks, I look after the fixed income side of the business, fixed income, and property.
Alec: Adrian Meager is the head so, we’ve the ‘groot kanon’ in there as well. Adrian, your responsibility?
Adrian: Morning everybody, I’m the general manager of Warwick Asset Management and I’m responsible for the day-to-day management of portfolios, etc. Together with my asset managing committee we do strategy and portfolios.
Alec: Then to your left in the blue suit wearing royal blue like me, at least we balance things out don’t we, Thomas Blamey – you’re a portfolio manager.
Thomas: Yes, hi Alec, and hi everyone. I’m a portfolio manager and equity analyst.
Alec: Okay so, there we have your team. We’ve got lots of people into the 100’s now who are listening in so, please guys, as Stuart said earlier, do try and get those questions in early. The idea is to try and get through as many questions as possible and the team is here to take us through a short presentation. We’ve done a ‘dry-run’ already so, I know what’s coming up and I think you’re going to find it’s quite a lot of fun but we do like to break-in from time-to-time, and bring in those questions when you have them ready. So, there we go, I’ll just get this onto the screen and get our pretty faces off. Adrian, over to you.
Adrian: Thanks, Alec. Today we just want to spend a little bit of time chatting to the listeners regarding offshore investing, and take you through how you can and the reasons for going offshore. Thankfully you’re not only going to listen to me today. We have, as introduced earlier, Sidney, who is head of fixed income, and Thomas Blamey, as a portfolio manager. So, we’re really going to do a situation whereby if there are questions we’re going to stop and we’ll take those questions as they get asked, rather than us running through the presentation. So, by all means, as those questions come through Alec, feel free to ask us. We’ll find that we might deviate a little bit from the presentation but I’m pretty sure that by the end of the next 30-odd minutes or so, our listeners will have a much better understanding of how to invest and reasons to be investing offshore. Without further ado, I’d like to start the presentation. Alec, if we can move onto the first slide, please.
Alec: That should be on the screen now.
Adrian: Yes, we have it in front of us. In 1997, it was the first time that SA relaxed its exchange controls and we were allowed, back then, to invest R200,000 offshore. We had to get tax approval, etc., and through the subsequent budgets we now sit where you can take R10m per registered individual, over the age of 18 and that’s per annum, which means that for all intents and purposes, exchange controls have been relaxed significantly. On top of your standard R10m per taxpayer, you’re entitled to take out a further R1m. Now that R1m, the advantage there is you don’t necessarily have to apply for tax clearance. So, this does allow investors to take a significant portion of their wealth offshore. Obviously, the amounts you want to take offshore is really dependent on your personal circumstances. We’re not really going to be delving too much into the financial planning side of that. In terms of how much you should take off in terms of your portfolio allocation. We really think you should be engaging with your financial advisor on that. So, Alec, if we can just move to the second slide please. While we’re moving on, we want to talk around 4 or 5 slides, on the reasons that you wish to invest offshore. The first one is diversification, and I’m going to try and spend a little time talking to you around diversification.
Thomas: Investing offshore is quite a topical issue at the moment, especially in SA where there’s a lot of political uncertainty and political shenanigans going on. It’s important to know that investing offshore – there’s much more to it than just political uncertainty. So, I’m going to run through a few of the things with the first one being diversification. The core to any sound investment strategy is part of diversification. It’s a great way to minimise risk and if done properly, it can also amass or increase funds. So, when we look at where we are today we’ve got the structure of the JSE made up of about 164 shares. You’ve got the top-end shares making up just over 50% of the index. You’ve got a very concentrated index and if you look towards the top-40, they probably makeup just over 8% of the index so again, a very concentrated index. As a SA investor if you’re getting exposure to the JSE only you are subject to a lot of concentration risk.
In today’s world it’s a lot easier to get a globally diversified portfolio, and that’s something investors should definitely be taking advantage of. When we look at our market, locally, South African investors who have exposure to the JSE, are getting exposure to about 164 shares. The top 10 shares of the index makeup just over 15% of the index. Whereas the top 40 shares makeup just over 80% of the index. So, investors getting exposed to the JSE are subject to a lot of concentration risk and it’s prudent as an investor to look offshore and have a globally diversified portfolio.
Just as an example, on the JSE if you wanted to get exposure to, let’s say, the pharmaceutical industry you’ve really got a choice of three shares, being Aspen, Adcock Ingram and maybe Ascendis Health. Whereas, if you look offshore you can potentially go and buy something like Johnson & Johnson, which is a wonderfully run company. One of the largest pharmaceutical companies in the world. They’re very cash-flush. Now, this is a company that’s products are used globally, around the world. I’m sure all the listeners or viewers know the products, they use them, they trust them, and will most likely continue to use them in the future.
If we just think in the last financial year Johnson & Johnson spent about $9bn on research and development. So, given our currency that’s probably around about R120bn – R130bn. They spent that on research and development. Now, that is roughly the size of Aspen so, they’re spending about an Aspen a year just on research and development. Investors that only want exposure to the local market don’t get those opportunities or don’t get to participate in those opportunities.
Another company, like Apple. Again, we don’t have tech companies like that on our market that exposes us to global consumers like that. We do have Naspers, who we can argue, it plays in the tech space through some of its investments but again, that’s one company. It makes up 20% of the index. It’s a very concentrated bet so, again, it’s a point of don’t just look where you live or what country you’re domiciled in. Look abroad. It’s easier these days to diversify your portfolio offshore and it’s something that investors should definitely be doing. If we can go onto the second slide, I think Sid is going to run us through some of the geographical breakdowns.
Sidney: Thanks, Thomas. Yes, I hear your argument around concentration and I think that’s quite important. What we, as SA investors need to do or change is really our mindset about being locally focussed. We are really on a global stage and being on a global stage means that you have access to global markets. I think the important thing here is that for very long, we’ve been precluded but as Adrian mentioned earlier on since the relaxation of exchange controls, markets have opened up to us and I think it’s important to realise that. I think I saw in one of Alec’s articles earlier this week, talking about having a helicopter view. So, get in the helicopter and look at the world geographically, and the ability to invest.
I think unfortunately or just by virtue of what has happened over the years, SA is still a very small player on the world stage. We’re less than 1% of the world stock markets as a whole so it’s really important that we take advantage of the opportunity that lies out there to get involved in other developed markets or even other emerging markets. All markets are going through different cycles as far as the economic and growth cycles are concerned so it’s really an opportunity for us to participate in cycles that are trending perhaps and having access to that. I think it speaks to what you said earlier on, Thomas, having a geographical spread is once again, improving your diversification and that’s the basics of investing. It’s good to have diversification to minimise your risk.
Alec: Can I interrupt please?
Alec: We’ve got a pile of questions and I’m really worried that we aren’t even going to make a dent in them. Just to throw one at you because I think this actually falls within what both you and Thomas have been saying so far. It comes from Zanielle Richards and he asks, ‘do you think in the long term, after the political hoo-hah has settled in SA that we will still need to rush offshore or do we always just have it in the back of our minds as part of a diversification strategy?’
Sidney: Yes, I think that’s quite an important question, the political hoo-hah is quite nicely put, and that’s going to be there for a while yet. I don’t know exactly when that’s going to settle but you’ll find political hoo-hah locally as well as abroad. I think we just have to open our mind to the fact that there is opportunity offshore and it’s really a case of timing it and doing it at the right place, at the right time. Now, if I had a crystal ball and I could time things exactly and tell you when to be more tilted offshore or less tilted offshore then, as I always tell my colleagues, I would be telling them from my yacht in the Bahamas because I’d know everything but unfortunately, I don’t. I think the question is important. Political risk will always be there in some form or the other. In SA it’s a little bit more elevated at the moment than normal perhaps but yes, when it does settle down the opportunities are still there and I think take advantage of it.
Alec: This one is from Daphne Day who says, ‘we’ve sold a property in SA and have invested in a high interest-bearing account for now. We’ve relocated to the UK and wish to invest the money here, at some point.’ It really gets to the rub of what this presentation is all about. She wants to know, ‘what are the options?’ Where does she even start to make her investments in an offshore market?
Adrian: It would all depend if the funds are still based in SA. It depends if she has relinquished citizenship or if she’s a dual resident in both SA and the UK. That would determine what she can do but there are many ways to get money in SA out of SA legally. We’re going to touch on those a little bit later but you can do asset swaps. You can do foreign allowance, etc. Where to actually invest that money in terms of where you actually want to put it, should it be in equities, bonds, or cash? That really is dependent on the risk profile of the underlying client and really, in order to maximise that they need to spend some time with their financial advisor. Be that a SA based or UK based advisor, and they’ll be able to give them guidance in terms of what allocation. But to keep money in SA the risk you have is that over time the Rand has devalued significantly against the Dollar and it will continue to do that so it’s quite a tricky one to get very specific on individual cases but ultimately, clients who are in SA, who need to get money out for investment purposes are able to do that.
Alec: Go into the ways to get money offshore, we’re going to touch on that and I urge you, Adrian, to try and keep it quite brief if you can. We will have the presentation and the recording available afterwards. There are so many questions.
Adrian: We’ve got lots of time but I’m going to touch on one and we’ll just keep it between the three of us so it becomes less monotonous to hear one voice. The first one is an asset swap now this is quite simply a Rand denominated investment where a financial institution uses its balance sheet. You invest in Rands. The money is then exported outside of SA, and into an investment. It could be cash, bonds or equities. The investment is always going to be repatriated back into SA Rands but you will get the benefit of a weakening Rand or the foreign growth in those particular assets. The one nice thing is that there is no limit to the amount that you, as an individual, can asset swap. However, you are limited in terms of the institution that is doing the asset swap, as to how much they can take off, of their balance sheet. Then lastly, you don’t have to apply for tax clearance, which does make it a lot simpler to get that money offshore. Tom is going to just quickly touch on what a feeder fund is and that’s one of the second options to get offshore.
Thomas: Thanks, Adrian. A feeder fund is just a local unit trust that invests most of its assets offshore. At Warwick we’ve got an international feeder fund that investors have invested in Rands and the local unit trusts or the Warwick International feeder fund, for example, will go and invest in the international funds abroad. We’ve got a North American fund, a European fund, a global fund, an international fund, etc. So the investment for the investor is made in Rands. They see the movement in Rands. Their returns, on gains or losses are made in Rands and when that investment is redeemed they will receive their Rands again so it is all in local currency for the investor.
Adrian: Then the third one is, which I’ll let Sid just run through, is your foreign capital allowance. I had mentioned it right in the beginning, and then Sid can just spend a little bit of time running through that way to invest offshore.
Sidney: Yes, I’ll be very brief but it’s really the ability for an individual who is 18 years or older to invest offshore or take money offshore. So, you’ve got your single, discretionary allowance of R1m a year. Then you’ve also got your R10m investment allowance per year that you could use. This is before you need to go to SARS for clearance in any form but if you want to go beyond that then you need clearance from SARS. Now, if you invest you can invest your funds physically offshore, your R10m, and it doesn’t always have to be repatriated if you choose not to do so. So, as Adrian and Thomas have alluded to earlier on, there are various ways and means that this can be done. Either through going through a feeder fund locally, or swapping it through an asset swap using a facility, or just purely using your discretionary or investment allowance.
Alec: Brilliant, well done. Christina wants to know, and this is a really good question here, ‘what percentage of investments should we consider moving offshore if we’re not planning to leave SA?’
Adrian: I think that depends again on the client’s individual risk profile and what they are attempting to achieve with their investments.
Alec: The sound has gone bad again. If you can just bring the microphone closer.
Adrian: I’ll bring my laptop and put it on my lap shortly. I hope that’s better. If we look at what percentage and as a company, we hold about 45% of our client’s money offshore. Not always directly offshore but sometimes through asset swaps or through feeder funds. Again, it depends on the individual investor. Now, if we back it up a little bit, if we’re sitting in the UK now, with you Alec, then no one would be questioning to only invest in the UK. UK investors invest throughout the world – taking advantage of the opportunities that are available because of companies that you can invest in. The same applies to SA. The only difference is that our SA Rand is significantly more volatile than the Pound. Okay, it has been recently volatile with Brexit and all the other fun that we’ve seen in the UK but the Rand is where you see most of the volatility. So, anything from, and I suppose you can go from 25% up, depending on what your objective is of those funds. Even if you’re not looking to emigrate and you’re just looking to hold wealth in a foreign currency then investing offshore and taking a greater percentage does become more feasible or something that the potential investor could look at doing.
Alec: Alright, that’s a good answer there so, somewhere between 25 – 45% is where you are at the moment. Phillip wanted to know, ‘it is pretty easy to get money in and out of SA but to move funds between investments that are offshore requires a permanent bank account offshore. Are there products that offer a one-off facility without requiring a permanent bank account?’ I know this because trying to open a bank account in the UK – we’re spoilt in SA with the quality of the banks that we have.
Adrian: Most of the institutions, you can send money directly from SA into an investment platform, where those funds can be held. The only problem you face is if you need to make a redemption then the funds have to come back into your SA bank account. Without plugging any of the particular banks in SA, a lot of them do offer offshore bank accounts and there are other institutions, international institutions that will offer banking where the balances will differ, depending on their particular rules. I would advise a client who is investing offshore to have an offshore bank account because if you’re travelling or if you look to redeem that money you may not necessarily want it in SA. Or you want to go from an investment into equities and maybe because of a change in circumstances, you want to move that into fixed income or something else. You don’t want to go from an offshore account, to a SA account, apply for a tax clearance and send it back out. You’ll want to utilise that offshore bank account so, there are many institutions out there that will facilitate and allow you to open those banking accounts.
Alec: That’s good news and I know. I’ve been an Investec client for many years, and Investec have got that facility. It is very easy in SA to open an Investec account because they’ve got a branch in the UK. FNB of course, are about to buy a big bank over here, Aldermore so the practicalities if you don’t have one could be difficult. Brian wanted to know, he asks, ‘can I get my pension fund to put more of my funds offshore?’
Adrian: Unfortunately, we are restricted prior to retirement with a SA pension in terms of the credential guidelines. We are restricted to 25% in offshore, plus another 5% into Africa so, unfortunately, it might not be what the individual investor wants. However, in terms of those guidelines, we are unable to exceed that amount. However, they are able to take an extra amount offshore being it with their voluntary or their discretionary funds and therefore, when you look at your total wealth you might be restricted on your pre-retirement money but your post-retirement money or your voluntary money you then have no restrictions on what you can take offshore.
Alec: This is probably for you Tom. It comes from Matthew and he wants to know, ‘given the majority of the ALSI 40 stocks are multinational businesses with exposure to foreign markets and economies do you think we actually get more offshore exposure on our local market or through the JSE then we might be considering that we do?’
Thomas: Yes, I think we definitely do get more offshore exposure than we do get exposure to Rand or SA Inc shares, or companies. But again, the point of looking or one of the reasons to look offshore is not just to get offshore exposure for a weakening Rand or for political reasons. So, again, a company like Facebook or Google or Apple so, some of those social media companies. We don’t have access to those companies on our local market. We think 3D printing, robotics, artificial intelligence, virtual reality, or augmented reality those industries we don’t actually have exposure to locally so, although we might have exposure through Rand hedge shares, which will benefit when the Rand weakens we actually also want to get exposure to the industries that are growing the quickest or potentially are the future industries that are going to provide profits down the line for investors. Again, it’s not just about going offshore for the sake of a weakening Rand or political issues in SA but greater opportunities on the offshore markets.
Alec: There’s a question on Bitcoin and particularly that an ETF is becoming available on Bitcoin, and another question from the same person, on Old Mutual Precious Metals Fund – could you give us very quick views on both of those?
Thomas: Just on Bitcoin that’s an interesting one. I’m definitely not going to give any advice on Bitcoin but I think there’s enormous opportunity for the underlying technology, the blockchain technology, cryptocurrency in the end is going to be the winner down the line that’s something that remains to be seen. Again, as I said, massive opportunities I think on the underlying technology and where Bitcoin is now, I think there’s a lot of emotion in it and a lot of fear of missing out. I would be very weary of investing in Bitcoin but again, the underlying technology I think is going to be the winner over the longer term.
Adrian: If you’re looking at a particular fund, I think you said the Old Mutual Precious Metals. Again, you’ve got to take a view, your view on where you see resources counters around the world. I wouldn’t be overly keen to be investing 100% into a precious metals type fund. I would rather diversify. I would have some end resources. There’s probably some opportunities going forward in resources again, depending on the underlying mineral that they’re mining but to be 100% invested in one particular sector of the market does add an elevated level of risk and it comes in from diversification. So, even though you might diverse across geographies but if you’re only buying mining companies across those geographies you’re not really diversifying. You want to try and end up with non-correlated assets.
Sidney: Maybe just on the Bitcoin side. I’ve always told my colleagues, with regards to lunch that I only eat food that I understand so, I pretty much apply that philosophy in my investment thesis as well. I only invest in things that I understand and I think we’ve reached a point in Bitcoin where there is so little understanding yet so much investment. It’s a word of caution, we’ve seen it across the world with bubbles happening in whether it’s an IT bubble or a two-way bubble many years ago. Let’s just apply that caution and get a measure of understanding of what you’re getting into before you do.
Alec: Investing is best when it’s boring and I’m a bit like you too on that one. Just bring me steak and pap, and we’re away. How about the costs involved in investing offshore?
Adrian: Costs are relative. If we look there’s always going to be numerous costs. The cost of physically taking money offshore. You go to SARS, apply for tax clearance, there’s no cost there unless you’re using some institution to apply on your behalf then they might charge you an admin fee. When you convert your Rands into a foreign currency the banks are going to charge a fee based on whatever the currency conversion is and then when you invest, if you’re doing it through a financial advisor the financial advisor might charge you either timescales for giving advice or a fee, depending on how their practice is setup. The underlying fund that you buy, the fund manager, would have a fee for managing that, be it an ETF, or even a standalone only equity or fixed income type fund so, those fees differ from manager to manager. If you’re doing it yourself or going through an advisor there are different fees in it but often the advisor can create additional out performance because of expertise if that’s the way that you wish to invest. I don’t think the fees offshore or investing offshore are prohibitive and therefore you shouldn’t do it. It might just depend again on circumstance and how much you want to take offshore in terms of your overall investment strategy.
Alec: It’s changed a lot hasn’t it, over the years. When the world first opened to SA, after 1994. The fees that were charged were incredibly high but there’s a lot of competition so, now it’s market related. I guess, just to add to what you had to say there, Adrian, is to just check what you’re paying before you start paying it. There’s a really good question from Petrus who says, ‘how do you handle SA tax implications with offshore investments?’ He goes through Allan Gray Orbis he says, and they provide me with a tax certificate for local reporting.
Adrian: In an asset swap ultimately because the funds are South African and held offshore there potentially could be some capital gains issues. In your feeder fund, most of the offshore funds you invest in are roll-up funds, which means that they reinvest the interest and dividends so, you haven’t got to worry too much about that. It’s mostly a capital gain or capital loss, depending on how you invested. Then in your foreign allowance your capital gain is really the growth in, let’s say it’s a Dollar denominated investment so, it would be the growth in Dollar to Dollar but s your viewer said, ultimately the institutions will send you tax information, be it capital gains or otherwise, and then you are obliged in SA to report that. Most of those institutions do not send the information directly to SARS. They send it to you and then within your tax return those different sectors that say, ‘have you earned any foreign dividend, or capital gains, etc?’ You would then note that on your tax return and yes, you are obliged then to pay tax on your foreign investments because we are a domicile based tax country so, you’re based in SA. Your worldwide earnings, your worldwide assets are all taxed in SA and you’re obliged to obviously, report those through to SARS annually.
Alec: Right, we’re getting to the end of the webinar for the day so, I’m going to try and whip through as many questions as we can. Maybe we’ll push it on for another 10 minutes or so. Here’s a really good one from Kobus van Heerden. He asks, ‘can a SA resident open a trading account in the US, say with Ameritrade, and then transfer money overseas to trade there?’
Alec: Kobus, if you just drop me that line at [email protected] and in fact, if there are any more questions that we don’t answer today, for whatever reason, just send it to me at BizNews and I’ll pass it onto the guys and we’ll get direct answers for you.
Adrian: Absolutely, and we happy to reply to all of those.
Alec: Super. Peter Bolo wants to ask, ‘can you please talk about probate Estate Duty issues, with offshore monies?’
Adrian: Okay, that’s quite a lengthy one so, I’ll give the synopsis. It really depends on how you have invested. Now, you can, as an individual investor you can take your money offshore and then that would then form part of your Estate. Then your Estate would wind up so, the question would be is do you have a Will for SA asset and a Will for your worldwide assets, which could help solve those problems. There are other ways to invest, whereby you invest in an international endowment or you could go through an international trust. Those are some of the ways that you can offset the issues of probate, whereby the endowment would change ownership from yourself to your spouse, for argument sake or in terms of a trust there might be beneficiaries that would continue after your death. Again, it’s advisable to have the discussions with your financial advisor around, which way to export the money or in what vehicle it should be held, in terms of endowments, or individual. Do you want to go and buy an offshore pension? There are numerous ways to do it but probate is something that you need to be mindful of because the last thing you want is to send money offshore on your allowance. They pass away and then those funds have to come back into SA and there are all sorts of implications of that.
Alec: Thanks for highlighting that one. Paul Jefferies wants to know, ‘what are the implications of paying dividends tax on offshore equities, especially in America?’ It seems that you get taxed again, when it comes back to SA.
Adrian: Yes, unfortunately you do because a number of countries around the world have a dividend withholding tax like we see in SA. Some of them would have some form of rebate facility whereby you could apply for your rebate back. We see that with some of the foreign denominator for example, Richemont locally, you can then apply for the rebate. Again, it’s each, individual jurisdiction would have its particular rules.
Alec: Another question from Matthew. He asks, ‘how difficult is it to get small and midcap exposure offshore and what are some of the best ways to go about gaining that type of exposure in your portfolio?’
Thomas: Thank you, Mathew. It just depends really, which route to offshore you’re going. For example, if you took money offshore directly and while you’re in the offshore markets you wanted to invest in some of the smaller or midcap shares directly that would be possible. Another way is to go directly again but perhaps go through an ETF that covers the SA midcap index but maybe the midcaps of the USA or Europe or the UK so, those would probably be your best options.
Adrian: Again, if you’re investing offshore you’ve got a choice. There’s so many options you can go to get access to the various sectors, be it in the US, be it in the UK, be it in Europe, be it in the Far East Asia, etc, so again, the recommendation is to chat with your financial advisor around your risk profile because as you move into these different sectors so, they might have a higher opportunity of return but also, your risk could be elevated, and we see that if you invest in China. You can do really well but you can see that stock market come off significant amounts as a risk and return plan.
Alec: Yes, it’s called ‘Bitcoin light.’ There’s a question from Roger. He asks, ‘can the funds in a tax-free account be invested in an overseas feeder fund ETF?’
Adrian: It’s been a long time since I’ve been a financial planner so, I’ve got to wrack my brain to check all these answers. Your tax-free account one of the issues you have is that you can’t invest in any funds that have performance fees but I’m shooting a bit from the hip so, if I’m wrong I will send a note out to you, Alec, and we can double check it. I think you can in a feeder fund because it’s a SA domiciled fund because the money does stay in SA. It’s just the issue regarding the performance fees. As soon as a fund has got performance fees it’s not applicable to a tax-free savings account but I think from the deep recesses of my memory, we are able to utilise the feeder type funds for tax-free accounts but again, I will double check and let you know.
Alec: I think one needs to do that. Cornelia wants to know, ‘could you touch on the hoops to jump through in order to invest in real estate in, let’s say, Europe as a SA citizen?’
Adrian: We’re getting slightly outside of our area of expertise as asset managers but ultimately, you’d have to apply for clearance. You’d have to get those monies outside of SA and again, you’ve got the questions of, ‘how are you buying that property?’ Is it bought in the name of a trust? Is it bought in an individual’s name, etc? Again, expertise should be requested from someone who really specialises in physical offshore properties to invest in offshore property through a listed fund. You can do that.
Sidney: Yes, I suppose the easiest way to get exposure besides actually buying into physical property is through the listed space and there are plenty of our locally denominated funds that have offshore exposure. Similarly, our locally listed property funds have a large percentage of their holdings in companies who invest offshore. I think if memory serves me right, probably 10 – 15 years ago, as little as 10% or 15% was invested offshore in our listed property space. Now, it’s more than 60% so, a fair percentage of our locally listed companies have their revenue coming from offshore. I think of the likes of Echo Polska, there’s Hammerson, there’s Capital & Counties and, also some of our bigger boys such as Growthpoint and Redefine who all have offshore exposure around the globe. Largely concentrated in the European area and a bit in USA as well but that’s probably the simplest and easiest way to get offshore real estate exposure.
Adrian: Sorry, Alec, just one second. There are also specialist’s funds out there where you can buy some of the offshore real estate investment trusts where you’re buying physical funds that hold direct offshore property not through the JSE. Alec, your question, sorry?
Alec: I’m glad that you’ve taken it nice and broad because there are two other JSE stocks who are 100% invested in offshore properties so there are many options. Rather than getting on a plane and trying to buy yourself a seaside flat in Croatia. Guys, we’ve come to the end but I think there’s one last question that I’d like to take from Ian Beck, and he says, returning to the foreign bank account question, ‘can one simply open one when you need it?’
Adrian: You can. There’s no problem to open up offshore bank accounts, as we touched on very briefly earlier. As a South African you are able to open up an offshore account and probably one of the simplest ways is to use one of the local banking institutions. You happened to mention one of them. There are many others that you can do it through. The hoops are not particularly onerous simply because as long as you don’t breech your exchange control rules there’s no problem to open those accounts and therefore, own an investment, and therefore report on it in terms of your local tax.
Alec: There’s a point here from David Oliver who says, ‘please, who are these guys we’re talking to?’ David, you obviously came in during the session. The three guys are Adrian Meager who is the head or the general manager of Warwick Wealth Asset Management, Sidney McKinnon, who looks after fixed interest, and Thomas Blamey, who looks after, as you can hear, equities. All right, the last question and a nice way to finish from Elmarie Weyers, and she says, ‘please just recap why we actually need to invest offshore in the first place.’
Adrian: Okay, very briefly, diversification. It’s not only investing in SA companies. It’s investing in countries throughout the world. Companies that are earning their growth throughout North America, South America, Europe, Asia, etc. You want to do it from a geographic spread. You want to do it simply because we’ve seen the weakening trend of the Rand and we know this is going to happen and we’re trying to ensure that your assets are held in a stronger currency, be that Dollars, Pounds, or Euros. Then probably the opportunities that exist offshore, in terms of artificial intelligence, and there is a much broader spread of companies that you can invest in that you won’t have access to in SA. We’re not saying, ‘take everything offshore.’ But we are saying, ‘you should consider it.’ Not only because you’re concerned about politics or a weakening Rand. You really are looking for global investment opportunities so, as to improve your returns and to diversify away from just SA and the Rand hedges in SA.
Alec: Gents, thanks. That was a pretty, comprehensive 45 minutes. Maybe we’ll be back with this or other topics in the future. There was a lot of interest in this one in particular, and thanks for sharing your knowledge.
Adrian: On behalf of Warwick Asset Management we’d like to, Alec, say thank you to you for hosting it. Thank you to the listeners for participating in it, and if there are any questions that we may not have touched on please, send them through to Alec. Alec, will forward them to us and then we will happily reply to those. There might be one or two issues that we didn’t really spend enough time on. We’ll be happy to help and provide some more information to your listeners. Thanks, Alec.
Alec: Brilliant, and that email address is [email protected] – great, thanks guys. I hope the weather in CT is better than it is over here. I’m looking outside the window and I think its another minus day today. I’ll have to just dress up warmly. There’s no such thing as bad weather just inappropriate clothing.
Thomas: We’ve got some sun in CT. If we could get some rain we’d be ecstatic.
Alec: Cheers, guys.