The last few weeks have been frenetic for South Africa’s banks, merchant banks, assurance companies and investment advisers who have been gearing up for D-day on Tuesday when South African investors will be allowed to invest R200 000 offshore.
Just how many investors are going to rush to their bank or brokers to invest money offshore is anyone’s guess. Estimates of how much money will flow out of South Africa range from R2 billion to R15 billion.
But remember that this is only part of South Africa’s gradual reintegration into the rest of the world’s financial markets. It seems that Tuesday will come and go very smoothly, possibly opening the door to further relaxation of forex controls and ultimately their scrapping.
The sooner that day comes the better. Some people believe that Reserve Bank Governor Chris Stals and Finance Minister Trevor Manuel should have used the current very favourable conditions to remove controls in one fell swoop.
International investors still rank forex controls as a bigger obstacle to foreign investment than crime, inflexible labour conditions or low productivity.
Most South Africans, and that includes the banks, merchant banks, assurance companies and their intermediaries, have been excluded from world markets for many years.
Our interest was merely academic as we were prohibited from investing money in overseas funds.
Now suddenly, everyone is an “expert” and everyone has forged links with the “best” fund managers in the world.
As one cynic remarked the other day, all the funds in the world have top-quartile investment performances. Nobody will admit when their funds are underperforming.
Investors will have to learn to treat claims on investment performance with a healthy dose of scepticism. They also need to ask their intermediaries what experience they have in offshore markets.
If you thought the local market with its 124 funds was confusing, try deciding on a fund out of a possible 32 000 mutual funds worldwide!
And the worst thing you can do is to pick funds that have emerged at the top of the investment performance pile over short periods.
While my advice is still to eventually expose between 30 and 40 percent of your assets to offshore markets, there is no need to rush in on Tuesday. After all, this is only the first, and not the last chance, to invest offshore.
The internationalisation of your investment portfolio should be done over time. Also, you should guard against incurring local debts in order to invest offshore. Prudent investors will use the next couple of months to expose themselves to international markets and their fund managers.
If you live in Gauteng, a good opportunity to gain an international perspective on investment markets is at the Saturday Star Investors Club seminar on Monday.
The highlight of the seminar will most probably be the satellite link-up with Michael Price, a leading fund manager in the Franklin Templeton Group. Price was recently featured on the cover of Fortune magazine as the “Biggest SOB on Wall Street”. He is one of the most powerful investment managers in the world and controls funds in excess of US$50 billion.
He recently sold his company to Templeton for an amazing US$817 million, almost a quarter of South Africa’s foreign exchange reserves.
o Magnus Heystek is an independent invesTment adviser and hosts Financially Speaking on Radio 702 on Wednesdays