Offshore investing strategies: diversify your portfolio

FOR many South Africans, offshore investing is a strategic move—one that provides access to global markets, reduces reliance on the local economy, and protects against currency volatility.

- ALEX ODENDAAL

While some investors pursue offshore exposure to meet specific future liabilities, others seek broader diversification across industries and jurisdictions that are not available locally. Whether driven by rational planning or a desire to mitigate domestic risks, investing offshore can be an essential component of a well-structured portfolio.

A primary reason to consider offshore investing is diversification, keeping in mind that South Africa currently accounts for less than 1% of global GDP. As such, a portfolio fully concentrated in local markets is subject to significant country-specific risk. By investing offshore, one gains access to a broader universe of global industries, more stable economies, and a better geographic spread of risk.

Investors can effectively choose to invest directly offshore by physically transferring funds out of the South African jurisdiction or to invest indirectly through a Rand-denominated fund. While direct offshore investment means investing in a platform listed abroad and investing the funds in foreign currency, indirect offshore investing allows one to invest through a local investment platform on an asset swap basis. Note, however, that there are a number of local service providers who have simplified the direct offshore investment process, so it’s important to do your research and select a provider who can implement an efficient solution.