Posted by jonathan on September 9th, 2008
Investing Offshore With Foreign Currency
Filed under: offshore
Under current exchange control regulations, South Africans are entitled to apply to the South African Reserve Bank to invest up to R2 million in foreign investments. Certain criteria have to be met – for example, you’ll need a tax clearance certificate from the South African Revenue Services. your tax affairs must be in order.
Once permission has been granted, this amount may be converted into any other currency and used to buy foreign investments. Your returns are paid out overseas.
Investing offshore with rands
With Sanlam’s rand-denominated offshore investment options, you can invest abroad using rands. There is no need for you to apply to the South African Reserve Bank for foreign exchange, or seek approval from the South African Revenue Service.
The fund manager will use your rands to buy foreign investments through an ”asset swap” arrangement with our foreign partners. And you will receive your returns in rands.
Buying offshore investments in this way not only enables you to gain access to foreign markets at lower entry levels.
The benefits of investing offshore
In recent years, the rand has been very much at the mercy of stronger international currencies. For example, over the past ten years it has depreciated at an average of 6% per annum against the US dollar.
Offshore investments can help you offset this gradual erosion of the value of your local portfolio by increasing the value of your investment when measured in local rand terms.
- Diversification: the opportunity to spread your risks over more than one market – with investments in both established and emerging markets. South Africa is considered a high-risk, emerging market, and emerging markets can often be very volatile, while established markets offer the prospect of steadier growth. A balance of both types of market exposure can give you the growth you need without excessive risk.
- Geographic spread: that is, investing in different countries at different stages in their growth cycles. Diversifying your portfolio across several economies is a way of smoothing out your returns, combining investments from economies experiencing rapid growth with those that are growing more slowly, or are even contracting.
- Increased investment opportunities: from foreign currency fixed-period bank deposits, foreign government and corporate bonds, shares on different stock markets, foreign venture capital, and many other options.
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September 9th, 2008 at 11:44 am
[...] Original jonathan [...]