Foreign investments – look before you leap

Any client looking to invest a sizeable amount should include foreign investments as part of their total portfolio. This is the view of Marcel Bradshaw, Managing Director of Glacier by Sanlam’s international division, Glacier International.

There are, however, an equal amount of opportunities and risks attached to investing internationally and clients need to have a clear understanding of exactly what it is they want to achieve. Some investors may want considerable assets overseas, as they’re considering emigrating or retiring abroad, while others may be considering sending their children overseas to study.

Factors to consider when deciding to invest internationally

• When are the funds needed? Are they intended for retirement, or does the client need to access the money sooner?

• What is the age of the client and how far away from retirement is he?

• Is the client considering emigrating or retiring overseas?


In the case of a client with an investment horizon of more than five years, it is suggested that 20-40% of the discretionary amount be invested overseas. If the client is considering relocation, then a larger sum – if not all of the funds – should be invested overseas. Essentially, the rule is the longer the investment term, the higher the percentage of funds that should be invested overseas. Clients should not be investing funds globally that are needed to provide income.

Other considerations

The global investment environment is decidedly more sophisticated and offers more choice in terms of asset classes, geographical areas and currencies. The average investor would do well to consider an international balanced fund from a well-recognised asset manager, using a spread of international equities, bonds and cash. In this case, the fund manager makes the asset allocation decisions on behalf of the client, such as whether to be overweight in emerging or developed markets.

A more seasoned investor could use a balanced fund as the core of his portfolio and could use specific asset class or geographical funds as satellite investments, depending on the individual risk profile and personal preferences. For example, the investor can overweight his portfolio with emerging markets, property or a specific country of choice.

The next decision revolves around currency selection. If the client is going to be spending the money overseas, he should invest in the particular currency in which the money will be spent. Currency movements are particularly difficult to predict, and the average investor is advised to leave currency choice to an experienced asset manager.

The final decision involves the choice of investment vehicle. Clients can either invest overseas directly, using their individual offshore allowance, or they can utilise the asset-swap capacity of a life company. Choosing the former method allows the investor to spend the money in the particular foreign currency as the funds do not need to be repatriated back to South Africa. An asset-swap investment is suited to smaller amounts or to situations where the client has already used up his individual allowance or does not wish to realise the investment abroad. In this case, the client enjoys the benefits of international exposure, but the funds will need to be repatriated back to South Africa.

International diversification is a must for every portfolio, but it’s a sophisticated process with a need for a high level of advice. Clients are urged to consult with their financial intermediaries to ensure their investment plan meets their needs now, and into the future.