The Covid 19 lockdown has plunged South Africa into a deep recession, travel and sport are restricted, the news everywhere seems to be bad, and to add insult to injury Eskom load-shedding in 2020 was the worst on record.

It’s no wonder that everyone seems to be investing overseas at the moment. But what are the pros and cons of offshore investing and should you be planning to hold some investments overseas as part of your portfolio?

The benefits of investing overseas seem to be obvious – South Africa makes up less than 1% of the global investment universe so international investing allows for greater diversification, with access to developed markets such as the USA and Europe as well as emerging market giants such as China and India. In addition, the Rand seems to weaken every year, so holding Dollars or Euros makes sense doesn’t it?

Rand strength can surprise – In 2001 one US$ was worth R12 but 5 years later one US$ was worth only R6.

As with most things the answer is not so clear-cut, and the solution that works for you must take into account your personal circumstances. For instance:

• Are you planning to emigrate one day? If you are, then utilising your annual allowance to regularly transfer cash abroad may make sense. However, international bank accounts are often subject to inheritance and SITUS taxes, which can be over 30% of your portfolio value, and probate overseas is often lengthy and expensive. So, holding your overseas assets in a legal structure that mitigates these taxes could add tremendous value.
  
  
• Are you looking to create a legacy for your children and grandchildren? An offshore trust can often be expensive and inefficient. Furthermore, many are situated in countries that have poor governance. However, if you look in well-regulated jurisdictions such as the Channel Islands, it is possible to find world-class trust companies that are easy to work with and will ensure the long-term protection of your family assets.
  
  
• Do you want to have a nest egg outside of South Africa? This is a common goal, but if you need to draw a regular income from your overseas assets, you may find that Rand volatility becomes your enemy. This is because while the Rand does indeed weaken against the US$ over time, there are also periods when it strengthens substantially, which increases your investment risk.

Many South African investors end up with poor returns on their offshore investments because they make emotional decisions. After reading a particularly disturbing news article or chatting with friends at the weekend braai they feel compelled to get money out of South Africa as quickly as possible, without first seeking professional advice and formulating a comprehensive investment plan.

Investing overseas is not as straight forward as it might seem.

Some of the most common adverse scenarios that South Africans encounter when investing offshore include the fact that many overseas financial markets are not as well-regulated as those in South Africa, and costs are often higher overseas. Also, interest rates on bank deposits are very low in most developed countries and at the moment Euro bank deposits, far from paying you good interest will actually cost you money.

The JSE has performed poorly over the last 5 years but over the long term, it is the best performing world market in real terms.

South African balanced funds usually comply with Regulation 28 and are allowed a maximum of 30% overseas assets, which combined with the fact that the bulk of JSE company earnings are derived from outside the country means that investors in South African funds can easily get access to a good degree of foreign exposure anyway.

Investing abroad makes a tremendous amount of sense, but a well thought out investment plan is essential to generate consistently good long-term returns and avoid common pitfalls.

Multi-manager funds combine a number of professionally managed investment options into a single offering. This strategy can provide crucial benefits that are otherwise difficult to achieve

A cornerstone of prudent investing is to ensure broad diversification in your portfolio. The reason behind this is that consistently identifying the next asset or market sector that will perform well is nearly impossible. By creating a portfolio which holds a wide variety of shares and asset classes, the investor is likely to benefit from reduced volatility and enhanced long term performance. 

One of the key benefits of a multi-manager fund is the extra level of diversification it can provide. Investors gain access to all the usual benefits of a managed fund, such as company diversification and management expertise, with the added layer of multiple fund managers. This is important because rarely will all fund managers perform equally in all market conditions. By diversifying across fund managers, exposure to the performance of a single fund manager is reduced.

Manager diversification offers optimal exposure to those different investment styles, which provides a more consistent return experience throughout a market cycle. Simply put, your portfolio is exposed to specific areas of the market so that you do not miss out when one style happens to be performing better than another. This is illustrated in the chart below

The underlying fund managers that comprise a multi-manager fund should be actively monitored to ensure that they are delivering the best possible outcomes for investors in varying market conditions. Exposure to an underlying fund manager in a multi-manager portfolio can be increased, reduced, or removed completely depending on how an individual fund manager is performing, and how complementary it is with the other managers in the portfolio. Effective active management of a multi-manager portfolio is an important part of the process and can provide additional benefits for investors.

In constructing a multi-manager fund, identifying a great manager is an essential part of the process. Just as important, however, is recognizing fund managers’ varying styles or approaches to how they invest, such as value or growth investing. Manager diversification offers optimal exposure to those different investment styles, which provides a more consistent return experience throughout a market cycle. Simply put, your portfolio is exposed to specific areas of the market so that you don’t miss out when one style happens to be performing better than another. This approach blends managers together in an efficient way to the benefit of investors.

Rutherford multi-manager portfolios are a blend of leading fund managers designed to provide broad diversification of asset classes and management styles, with reduced volatility and exceptional client returns

Many people consider the day they retire to be the finish line, the point after which financial planning and investing should be a thing of the past. Nothing could be further from the truth.

There is a great deal written about planning and investing to accumulate enough wealth so that you are able to retire, and while not detracting from the importance of such advice, it is equally important, if not more so, to manage your finances and set investment goals during retirement. Given that people are living longer, you may find yourself living just as long in retirement as you did during your working life.  So, if you spent 30 years planning and strategizing your retirement savings, why wouldn’t you be equally meticulous with your finances during your 30 years of retirement? In fact, it may be argued, that investing during retirement requires an even greater level of care as there is little room for error and little time to make up for mistakes.

Longer life expectancy means that there are plenty of financial decisions to be made in your sixties and seventies.

The cornerstone to long term financial success is to have an honest conversation with a professional financial adviser. Apart from the nuts and bolts of adding up your assets, quality financial planning and advice should incorporate holistic lifestyle aspects as well.  Remember this is your life and your plan and needs to be personalised.  So, if you want a lock up and go and lots of travel that is what your plan should cater to. If you want a bigger garden to spend time at home with your grandchildren, that is what you plan for.

Draw up a budget, have a financial plan and review the plan regularly against actual investment performance to make sure your finances stay on track.

The performance of your investments is likely to fluctuate with market cycles. One of the challenges of investing after retirement is that the income you may ideally want is usually quite constant. However, stock market returns are notoriously lumpy, and even interest rate cycles can have an enormous influence on retirement incomes. Managing these factors is critical to a long and comfortable retirement.

Even though you may be retired, a 30-year investment horizon means that you are a long term investor

Many people think that since they are now retired, they must take a very conservative approach to investing, believing that cash is king. The problem is that inflation could eat away at your retirement portfolio over the years. We know that the asset classes that make up your investments will drive your portfolio returns in the long run and that you (and your spouse) may have a 30-year retirement to look forward to.  You will therefore need an asset allocation that matches your expected returns and investment horizon, incorporating risk assets such as local and international equities.

It is a misconception that during retirement all your investments must be low risk with a propensity to cash

Retiring, living well, and being financially comfortable are not conflicting goals, so long as you maintain a strong sense of the realities of financial planning during retirement. It should never be about retiring and hoping you’ll have enough money, but rather planning and effectively using the financial resources you have to make the best choices along the way.

Multi-manager funds combine a number of professionally managed investment options into a single offering. This strategy can provide crucial benefits that are otherwise difficult to achieve.

A cornerstone of prudent investing is to ensure broad diversification in your portfolio. The reason behind this is that consistently identifying the next asset or market sector that will perform well is nearly impossible. By creating a portfolio which holds a wide variety of shares and asset classes, the investor is likely to benefit from reduced volatility and enhanced long term performance. 

One of the key benefits of a multi-manager fund is the extra level of diversification it can provide. Investors gain access to all the usual benefits of a managed fund, such as company diversification and management expertise, with the added layer of multiple fund managers. This is important because rarely will all fund managers perform equally in all market conditions. By diversifying across fund managers, exposure to the performance of a single fund manager is reduced.

Manager diversification offers optimal exposure to those different investment styles, which provides a more consistent return experience throughout a market cycle. Simply put, your portfolio is exposed to specific areas of the market so that you do not miss out when one style happens to be performing better than another. This is illustrated in the chart bel

The underlying fund managers that comprise a multi-manager fund should be actively monitored to ensure that they are delivering the best possible outcomes for investors in varying market conditions. Exposure to an underlying fund manager in a multi-manager portfolio can be increased, reduced, or removed completely depending on how an individual fund manager is performing, and how complementary it is with the other managers in the portfolio. Effective active management of a multi-manager portfolio is an important part of the process and can provide additional benefits for investors.

In constructing a multi-manager fund, identifying a great manager is an essential part of the process. Just as important, however, is recognizing fund managers’ varying styles or approaches to how they invest, such as value or growth investing. Manager diversification offers optimal exposure to those different investment styles, which provides a more consistent return experience throughout a market cycle. Simply put, your portfolio is exposed to specific areas of the market so that you don’t miss out when one style happens to be performing better than another. This approach blends managers together in an efficient way to the benefit of investors.

Rutherford multi-manager portfolios are a blend of leading fund managers designed to provide broad diversification of asset classes and management styles, with reduced volatility and exceptional client returns