Author: Stephanie Bakhuis


Offshore Investing in the world of COVID-19

Given recent events and the uncertainty around the world, queries about offshore investing are at an all-time high. Although COVID-19 certainly has a role to play, questions and discussions around investing offshore are always extremely topical amongst South Africans. This topic evokes emotion and brings up many questions, which if answered correctly, will enable you to make sound financial decisions in keeping with your long-term financial plan.

The Why

Why Should I invest offshore? Well, as South Africans, having exposure to offshore assets is essential for the following reasons: it provides protection against inherent risks in South Africa and the depreciation of the Rand; it helps to diversify investments, and it allows access to a greater range of opportunities to invest in.

The How

There are two ways in which you can invest offshore. The first is taking a direct route, which means that you physically buy offshore currency, for example, US Dollars. Once the money is in offshore currency, you can invest those US Dollars in various offshore investments.

The second is through asset swops or feeder funds. By investing via asset swops or feeder funds, your money never has to change from Rands to an offshore currency. It is the chosen investments of underlying funds that you choose that gives you the exposure to offshore assets.

Your Financial Plan

The big question is, does investing offshore make sense in terms of your Financial Plan? Direct versus asset swop offshore investing often has a different place in investors’ portfolios, and we often forget that many of us already have offshore exposure.

At Chartered, we separate clients investments into Retirement Assets and Surplus Assets.

With clients Retirement Assets, we aim to have the right balance between local and offshore exposure. This is based on expected future growth and the need to beat inflation in South Africa. This would be done via asset swops, because this money is needed to fund future expenses, and therefore needs to be flexible and liquid. Often bringing money back from overseas is costly and impractical.

With Surplus Assets, we tend to invest this money directly offshore. This allows us to buy foreign currency which will be held offshore and doesn’t need to come back to Rands. This route of investing is often seen as a kind of “insurance policy” for South Africans. In some circumstances, depending on the amount, you may need to apply for clearance.

Investing directly offshore is generally warranted with larger amounts given currency fees and the costs of investing offshore. Making use of asset swops can be a great opportunity to gain offshore exposure with smaller amounts.

The When

Is now a good time to invest offshore? It is a gamble to try and time currency because the Rand is volatile. We forget that the Rand went to more than R16 to the Dollar in 2016.

At the time, this seemed impossible. In 2020 we have gone from R14 to over R19 and all the way back to around R16.50 in a matter of a few weeks. At the time of writing, the Rand is back up to R17.20.

If we stay true to the long-term nature mentioned for Surplus Assets or Assets that are not needed over 10+ years, then what we pay for our US Dollars is less important.

Global markets are still trying to make sense of the virus, the impact on economies and the effect of all the stimulus packages seen around the globe.

With such uncertainty, both globally and locally, any investing should be done with extreme caution and in line with your Financial Plan. The decision should not be an emotional one. Now more than ever, professional advice is crucial to making the right decision for your long-term wealth.

For a more in-depth discussion on this topic, listen to our podcast.



Life is a Rollercoaster

When I sit back and look at what has happened over the past six to eight weeks, I realise that we are living in a period that we will remember forever and that in all likelihood will be spoken about when we are no longer around. It feels as if we are all on a rollercoaster, both emotionally, and in terms of the markets. We have experienced the gut-wrenching first decent, we are at the bottom, hanging upside down and patiently, or not so patiently, waiting to turn around and come back up.

Who knew that a simple coronavirus could cause so much mayhem? There was a video on Twitter where Professor Hugh Montgomery explained how infectious this virus is. He describes it like this – if you get regular flu, you will infect on average 1.3/1.4 people. When those people pass it on, that would be the second time it is passed on, and once this has happened ten times, you would have been responsible for 14 cases of flu. With Covid-19, however, if you get it, you are likely to pass it onto three people on average.

Although this doesn’t sound like much, if this also happens ten times, you are responsible for infecting 59 000 people.

When you look at it this way, it is not surprising that countries have had to go into lockdown to slow this rate of infection. It is also not surprising that we have seen a drastic decline in markets both locally and globally.

John Campbell mentioned in his letter, (Reporting from the Helm,) that the JSE (prior to recent positive days) lost approximately 31% of its value. We were not alone on this, although South Africa was hit particularly harder given the unstable economic environment we were in to start with.

What makes this market crash so significant and “different” to others is that it impacted all asset classes apart from cash. Asset classes are shares, bonds, property and cash – local and offshore. When we see our money going down, it is tough not to get emotional.

So, what is essential to remember while we feel like we are left hanging at the bottom of the rollercoaster route with your feet dangling in mid-air?

  • While the impact on investment portfolios is significant, we must remember that this is not likely to be a long-term event.
  • While this market crash feels different, and it absolutely is, keep in mind that we felt like it was different in every prior market crash (2008, 2003, 1998 and the list goes on).
  • We rely on our professional investment consultants to make any strategic decisions in our portfolios. They can do this without the emotion that we feel, which enables them to make the correct decision for long term growth.
  • Since markets are down, this also means that there is a great opportunity out there for managers to take advantage. For example, shares are looking cheaper than they have in a long time. Further to this, bonds and property are also offering opportunity.
  • While the recent price war in the oil industry caused extra havoc for markets globally, a low oil price is good for consumers. This could even help counter some of the effects that we may see coming out of South Africa’s downgrade to junk status.

The most important thing to remember over these periods is to stick to your investment strategy. The risk of switching to cash (safe haven) now is that you may miss out on the recovery.

While we don’t know if markets are out of the woods yet, historically when markets have recovered, a significant portion of this recovery has taken place in the first 60 days. The graph below illustrates this on four previous market crashes (1987, 1998, 2003 and 2008).


If at the bottom of the crash in 1998, for example, you had R100 at that point. Your R100 would have grown to R120 by remaining invested in the JSE All Share Index. This is a return of 20% in just 60 days, not to mention the positive gains that followed the 60 days. This is far more than an entire year worth of interest that you could earn in the money market (cash). Hence, we do not want to miss out on a recovery as the long-term effect of missing this recovery is significant.

And so, I leave you with one more graph below, that we received from Old Mutual, which represents what the JSE (Johannesburg Stock Exchange) has done since 1974.


I am sure you can identify a few memorable events along the way to get us to where we are today. The red arrows mark the market corrections and the dotted arrows, the time it took to full recovery. The general long-term trend has been upward. This period that we are in is going to mark another memorable event in our history, locally and globally. I hope this gives you some peace of mind.

Remember these positive points while you feel like you are hanging upside down at the bottom of your rollercoaster.


Johannesburg Office
Tel: +27 11 502 2800
Eastern Cape Office
Tel: +27 41 001 1026
Western Cape Office
Tel: +27 21 001 0048
Connect with Chartered

Chartered Wealth Solutions is an authorised financial services provider
(FSP no. 13909)

Newsletter Subscriptions

Subscribe to Chartered Wealth Solutions Communications

By clicking Subscribe, you consent to the processing of your personal information by Chartered Wealth Solutions in accordance with our Privacy Policy and acknowledge that this may include receiving newsletters and invites. You are aware that you may unsubscribe at any point.

© Chartered Wealth 2018 | All rights Reserved