In an increasingly interconnected world, South African investors are looking beyond borders to diversify their portfolios and protect their wealth. However, with opportunity comes risk, especially regarding currency volatility, tax implications, and limited local investment options.
Understanding the risks, not just the rand
The rand is among the most volatile currencies in the world. Since the 1960s, it has depreciated against the US dollar by an average of 5% annually. This long-term trend, combined with South Africa’s high inflation and political uncertainty, makes a compelling case for externalising wealth.
While many investors focus solely on currency risk when considering offshore investments, this is just one piece of the puzzle. There’s also the opportunity cost of not accessing global sectors like technology and consumer services, which are underrepresented in the South African market.
What does hedging really mean?
Over the long term, we expect the rand to depreciate due to South Africa’s relatively higher inflation than developed markets. This means that if your offshore investment is worth $5 882 at an exchange rate of R17 to the dollar (equivalent to R100 000), and the rand depreciates to R20 to the dollar, the same investment would be worth R117 647 in rand terms – purely due to currency movement. In addition to this, the actual investment return from the underlying international assets must also be considered. By holding assets in a foreign currency, such as the US dollar, euro, or pound, South African investors can reduce their exposure to local currency depreciation.
Hildegard Wilson, managing director at Glacier International. Image: Supplied
Access to global opportunities
One of the most compelling reasons to invest offshore is access to a broader range of investment opportunities. Partnering with Glacier International gives investors access to some of the world’s best portfolio managers and sectors that are underrepresented locally. This global reach allows investors to build portfolios diversified by geography and currency, industry, and asset class.
Glacier International offers three main offshore solutions designed to help investors hedge against these risks and build more resilient portfolios:
- Glacier International Global Life Plan
- Glacier International Global Investment Plan
- Glacier Offshore Investment Plan
Each solution allows investors to externalise the rand, converting local currency into a stable foreign currency. This is the first step in reducing exposure to rand depreciation.
Investors can benefit from favourable tax structures depending on the chosen solution. For example, the Glacier Offshore Investment Plan, which has a minimum monthly investment of R5 000, is a discretionary investment where capital gains are taxed in the foreign currency, meaning the rand’s depreciation doesn’t inflate your tax liability. Over time, this can result in significant savings.
Managing risk intelligently
Investing offshore isn’t just about chasing returns – it’s about creating a well-balanced, globally diversified portfolio. While it’s important to be aware of factors like currency movements, geopolitical developments, and market shifts, these dynamics also present growth and value creation opportunities. With Glacier International, South Africans can confidently explore these opportunities while complying with South African Reserve Bank (Sarb) exchange control regulations when externalising funds.
By diversifying the rand, leveraging tax-efficient structures, and tapping into the world’s best investment ideas, investors can build resilient portfolios that thrive over time. With Glacier International’s solutions, you’re not just investing offshore – you’re investing with insight and purpose.
Unlock a world of infinite international investment opportunities with Glacier International today.
Hildegard Wilson is managing director at Glacier International.
Glacier Financial Solutions (Pty) Ltd is a licensed financial services provider.
Sanlam Life Insurance Ltd is a licensed life insurer, financial services and registered credit provider (NCRCP43).
Glacier International is a division of Sanlam Life Insurance Limited.
Brought to you by Glacier by Sanlam.
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