The continuous devaluation of our currency is making local investments, irrespective of how good they are, lose value over time in international terms. For this reason, investors should be looking to invest in hard currency and hard assets offshore.
Diversification is the most prudent approach, according to Dave Elzas, CEO of the Geneva Management Group (GMG), a global financial services provider headquartered in Switzerland and with global offices all over the world, including South Africa.
“You tend to concentrate your risk when investing in only one geographic location or one asset class,” he cautions.
Elzas highlights the attractiveness of investing in assets like international real estate for those who seek long term value growth. However, investors should be cautious about which types of real estate to target, as different segments of the global real estate market perform differently at different times.
“That’s why it’s best for a qualified investor, someone with sufficient capital to be able to invest widely, to work with an advisor or investment manager who has built up a solid track record in the real estate environment and who has a clear investment strategy in place. That way you can identify which countries or even regions and type of properties offer the most solid and reliable return opportunities.”
“The UK remains a safe haven for property investors despite the political uncertainty caused by Brexit. Including international real estate in an investment portfolio is wise, if the properties have been appropriately selected,” advises Elzas. “Operating internationally, we have developed a thorough understanding of multiple local markets, giving us the ability to offer investors solid, insightful advice on real estate opportunities in a number of countries, including the UK, Switzerland and Germany.”
In addition to real estate, carefully selected equity exposure on international stock exchanges can add significant value to one’s investment portfolio. GMG looks particularly for long term value in shares of industry leading multinational corporations. The benefit of this is that these companies earn revenue from multiple countries, which adds to the diversification element and mitigates the volatility of the portfolio’s income profile.
When you earn revenue in multiple countries, it means that when one economy or its currency weakens for a particular reason, the overall loss is not as dramatic due to the diversification of the revenue streams.
“The pricing of intermediaries’ and management fees is also important since the investor’s returns should not be eroded by excessive or multiple layers of charges,” Elzas shares. “This can be a problem when one invests through investment platforms or Linked Investment Service Providers (LISPs) which mostly offer “funds of funds” and other multi-layered investment vehicles”.
“The structuring involved in these types of investments results in numerous layers of fees, many unknown to the client,” he says. “To limit the asset management costs it’s best for the investor to invest in a more direct manner. Ideally via one layer of advisory only.”
Despite international uncertainty, both political and economic, there are still countless options for a South African investor to reap solid rewards.