*This content is brought to you by Brenthurst Wealth
Mags Heystek, CFP® *
Ask any advisor about fixed investments, and you will get the stock standard reply about “security, assurance, peace of mind, etc.”
This is all true, and fixed investments fill a certain gap when it comes to providing investment options.
The main criteria for fixed investments are typically a set term (5 years being quite common for cash investments) as well as a fixed rate of return, and most importantly the element of assurance for capital. Reducing the variable of volatility and capital loss is ultimately the main goal. In some other cases, providing income from interest as well, but it is all about protection.
A host of fixed investments, for both discretionary capital, as well as compulsory investments such as living annuities, that fill this gap efficiently, are available. Astute advisors are also able to provide direct offshore USD based fixed investments. The nature of fixed investments has greatly evolved, providing investors with more options than ever. Understanding the exact nature of each offering is quite a task, but it is all about providing choices for investors.
As always, each investor’s requirements may differ, and not every solution may be applicable or suitable. It is therefore recommended to discuss the various investments options with your advisor.
Local Offering
There are many options from a local, ZAR based point of view, with various terms ranging from 3-5 years, and there are also options to have index linked returns depending on the structure of the investment.
There are also straight forward interest-based capital fixed term investments, but there are various investments and firms that provide these types of investments.
For compulsory investments, such as retirement capital, investors have the option of fixing either a portion, or entire amount of their retirement capital, providing more stability for cash flow requirements.
Life Annuities, as they are referred to, have evolved tremendously, and investors can now elect a portion of their capital into a life annuity, coupled with a living annuity (referred to as a hybrid annuity), and investors can elect guaranteed terms, as well inflation protection (not available on all platforms). The largest difference with the compulsory capital is that investors cannot change their terms once the contract is in place.
Offshore offering
From an offshore point of view, investors have a broad range of solutions available as well.
Fixed term, USD based investments are available, as well as hybrid discretionary offshore endowments, where investors also have the ability to invest a portion of their USD based investments in fixed structures within offshore endowments.
Many fixed investments also have capital protection mechanisms built in, meaning that investors will never leave with less than what they started with; and the same holds true with the offshore options.
The offshore fixed investments do carry slightly more risk than their ZAR based counterparts but provide a good alternative for investors who are more cautious of offshore market movements.
* Mags Heystek, CFP®, is an advisor at Brenthurst Wealth Sandton and Cape Town [email protected]
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