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Johannesburg - Over the last few years, betting against the rand has proven to be unprofitable for investors who sought hard currency exposure. However, it may be the right time now to revisit this part of your portfolio.
"It is natural diversification," Peter Bourne, MD of asset management firm Ashburton, told Fin24.com.
Recent statistics from the Association for Savings and Investment (Asisa) showed South African investors did not take a keen interest in offshore opportunities in 2009.
As at December 31 2009, total assets under management in locally registered foreign funds stood at R108bn, down from the R114bn reported at the end of 2008. In comparison, investment in local unit trusts and investment schemes came in at R786bn by the end of 2009.
"South African investors have traditionally chosen developed markets over emerging markets for their offshore investment," said director at Investec Asset Management Jeremy Gardiner.
"Given the poor returns of developed markets over the past 10 years and the poor prognosis for the US, UK and Europe going forward, South African investors are justifiably jaundiced towards investing offshore."
However, Gardiner said with foreign exchange regulations being relaxed and the rand at a strong level against international currencies, now may be "the ideal opportunity for investors to take funds offshore".
Go for China, India and Japan
The rand has recently been flirting with the R7.20 level to the US dollar, regarded by many as unnaturally strong.
Bourne agreed that the currency, coupled with poor returns, has made it harder for financial advisers to recommend offshore investments, but warned they should not be forgotten. He said this has previously been viewed as a way that rich, sophisticated investors could make money, but that is the wrong impression.
"People taking money offshore is not a get rich scheme, it is a stay rich scheme," he said.
Equity markets which appeal to the Ashburton fund managers include China, India and Japan.
"Japan is a big economy and they have world class companies," said Bourne.
He also had praise for South Africa, which he said had "held up" quite well, with an "amazing sense of energy" similar to what was being experienced on the ground in high-growth economies like India.
- Fin24.com