The Joys And Benefits Of Offshore Investing

The quality of management and destinations of investments remain key for fund performance.

- Leon Kok

In our interactions with fund portfolio managers and analysts this past quarter, the preferred leaning in fund categories was strongly towards offshore portfolios.

It came as no surprise. Yes, South Africa has huge societal, political, and economic distresses. But on the flipside, mutual funds throughout the world continue to grow explosively, and not least encompassing impressive global-orientated funds. SA, meanwhile, constitutes less than 1% of global market capitalisation.

The number of recognised mutual funds worldwide increased from 83 000 in 2009 to 123 000 last year, with their biggest domiciles being the US, UK, Germany, and Australia. Well over 50% of households in the US are currently invested in them, double the figure of 30 years ago.

The big attractions of these vehicles, of course, are portfolio diversification and professional management at low cost, transactional efficiency, transparency (they generally invest in marketable instruments), tax incentives, and regulatory factors.

The many thousands of investible shares in the global universe allow access to growth opportunities, industries, and geographies not available in the local market.

Growth of global mutual funds is particularly fired at present by the increasing globalisation of finance and the expanding presence of many multinationals in a large number of countries, and not least the strong performances of equity and bond markets.