Johannesburg - While more South Africans are beginning to wise up to offshore investment opportunities, the temptation still seems to be for investments with a local flavour.
Many analysts recommend between 30 and 40% of your portfolio should be invested offshore, yet South Africans have been so consumed with the out-performance of the local markets that they have failed to diversify their investment basket.
This is the message from Di Turpin of the Association of Collective Investments (ACI), reporting on the latest figures covering foreign currency-denominated funds.
At the end of the three months to end-June, just under R112bn was invested in offshore fund assets , while R656bn was invested in local funds.
Data supplied by Equinox.co.za shows that no foreign-based general equity fund unit trust has delivered a positive return for investors over the last year.
The best-performing fund over 12 months was the Coris Capital International Equity Fund of Funds, delivering a -0.25% return. while the worst-performing fund was the SIM Global Best Ideas Feeder Fund which contracted by 18.66%.
Over a three-year period, however, the RMB International Equity Fund of Funds delivered a 69.05% return for investors seeking exposure to international equity markets.
But Deutsche Bank's X-Tracker ETF product seems to be attracting investors' funds, even if returns are't yet being delivered.
Ian Leisegang, the head of global equity at Deutsche Bank, believes that many South Africans are only beginning to see the opportunities that exist to access international markets and diversify their portfolios.
Leisegang heads up Deutsche Bank's X-Trackers products, which provides South African investors with the opportunity to invest in exchange-traded funds (ETFs), giving easy access to other international markets.
In April 2008, Deutsche Bank introduced three new funds giving South African investors the opportunity to invest in the Japanese, US and World MSCI indices. In four months, the assets under management in these ETFs have grown to R55m, R57m and R99m respectively.
These funds mean that ordinary South Africans can be passively invested in the best performing companies in these regions and can have direct investment in the likes of Toyota, Honda, Mizuho, Coca Cola, General Electric and Google.
"We have seen quite a lot of interest in the MSCI World and MSCI Japan Indices of late," says Leisegang.
However, the X-Trackers' performances are linked to equity markets and investors have seen their investments come under pressure in line with other markets over the short term.
According to the ACI's figures, there was a net equity outflow of R2.9bn by retail investors in the foreign currency-denominated funds in the June quarter against an inflow of R1.1bn into institutional funds, resulting in a net total outflow of R1.8bn from equity funds.
Assets dipped from R117.9bn to R111.6bn.
Investments in offshore products provide South Africans with some protection against a traditionally weaker emerging market currency.
Stellenbosch University's Bureau for Economic Research (BER) believes that the rand is likely to weaken against the US dollar during the fourth quarter of 2008. It has attached an average value of R8.45 to the US currency.
- Fin24.com