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An update on offshore investing in a volatile world

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Offshore investments should form a critical part of your investment portfolio. They provide many more investment opportunities and hedge currency risk to protect against inflation.

We explore the right proportion of your wealth to hold offshore, important retirement regulation changes, the best ways to structure your offshore investments, and provide insights from SA’s top asset managers on the ‘offshore vs local’ investment dilemma.

Background on offshore investing for South Africans

South Africans have historically gained offshore investment exposure by buying shares of global businesses listed on the Johannesburg Stock Exchange (JSE). However, the JSE has reduced in size over the past 30 years, falling from 776 listings to just 339 listings today. There were 24 company de-listings in 2021 alone.

The reduction of companies available on the JSE and a strong outperformance of global markets over the past decade has caused investors to seek additional offshore exposure by either investing money directly offshore or by using Rand-denominated offshore unit trust funds, known as feeder funds. Over recent years, local fund managers have increased their offshore fund offerings and new global passive product offerings have been made available to the South African market.

How much should I hold offshore?

Investors should pay careful attention to how much of their personal wealth to invest in offshore assets. Here are some important factors to consider:

  1. The time you expect to spend overseas versus in South Africa in the future
  2. Your personal tolerance for investment fluctuations caused by currency movements such as the Rand/Dollar exchange rate
  3. Your personal risks associated with the South African economy, such as your employment industry and the nature of your assets (SA fixed properties as an example)

A general industry guideline is:

Investment Strategy Expected Time Invested Portfolio Offshore %
Conservative 3 to 5 years 10% to 30%
Moderate 5 to 10 years 30% to 50%
Aggressive 10+ years 50%+


The key issue is protecting one’s wealth in global terms. A large percentage of South African residents’ shopping baskets are affected by offshore currency and commodity prices.

  • Fuel – Brent Crude oil is priced in US Dollars
  • Food – many food items have commodity inputs that are priced in US dollars
  • Medical costs – the price of pharmaceuticals and treatments are subject to currency changes
  • Technology products – mostly imported
  • Vehicles – most are imported, and components are imported
  • Education costs – especially for those who want their children to study overseas
  • Travel – overseas travel (business or leisure) is priced in foreign currency

Offshore investing for retirement investors – Regulation 28

In February 2022 National Treasury surprised investors by increasing the offshore exposure allowed in retirement funds from 30% to 45%. This was a vital shift in government policy and has increased the attractiveness of retirement funds from a diversification perspective.

This change allows Regulation 28 fund managers to increase the direct offshore exposure of their funds up to 45%. Many fund managers have not yet increased their offshore exposure to these levels, but they have the flexibility to increase their offshore exposure should they feel the need to.

Investors in retirement funds (retirement annuities, pension, provident, or preservation funds) are not permitted to invest directly in foreign currency funds or shares, however they can invest in Rand-denominated unit trust funds that provide offshore exposure. Balanced funds and Stable funds in South Africa generally hold between 25% to 45% of their assets offshore.

Offshore investing for cash investors

There are many options available when using cash to invest offshore. We summarise a few of these options below:

Invest in Rands

Minimum investment: R 50 000

Investment options: Offshore feeder funds denominated in Rands

Invest in foreign currency

Minimum investment: $ 3 500

Platform: Allan Gray Offshore

Investment options: ±60 offshore unit trust funds in various currencies

Invest in a foreign currency with tax and estate benefits

Minimum investment: $ 20 000

Platform: Old Mutual International

Investment options: Hundreds of offshore unit trust funds and index funds in various currencies

If your money is already offshore, SARS and SARB approval is not required.

What the local fund managers are saying

Ninety One Fund Managers (formerly Investec Asset Management)

Ninety One Fund Managers state that National Treasury’s decision to increase the offshore limit to 45% will provide increased flexibility to construct portfolios that better reflect their investment views.

Ninety One say that their Quality team have previously run models to determine what the ideal local/offshore split would be for an unconstrained long term portfolio, global equities receive the greatest allocation of 63% in an unconstrained portfolio. They observe: “There are better growth prospects outside of South Africa. While our economy recovered strongly from the depths of the COVID crisis, the overall growth picture remains lacklustre (less than 1% in real terms). What’s more, growth assets outside of South Africa tend to be of a higher quality with an increased certainty of cash flows, hence the skew towards global equities.”

Secondly, while Ninety One believe global equities provide the best quality long-term opportunities for growth, they concede that managing currency risk, and the resulting volatility, is something that investors and asset managers need to treat with care.

The higher the volatility of an asset class, the more sharp and potentially unpredictable the price movements of the asset class will be. Investors want to be compensated by higher long-term returns if they are going to take on additional price volatility.

Ninety One Conclusion:

Ninety One Fund Managers are excited about the changes National Treasury have introduced and expect to increase offshore exposure in their Regulation 28 funds in the future, especially when better opportunities present themselves. For their conservative (low equity) fund, they expect to keep their offshore exposure around the 30% level. While excited by the greater scope of opportunity, they believe that currency risk needs to be carefully managed to mitigate volatility in their portfolios.

M&G Investment Managers (formerly Prudential)

M&G Investment Managers recently tackled the question: Offshore investing with Regulation 28, what’s the optimal portfolio allocation?

In a recent webinar, M&G explained that while Regulation 28 fund managers can now take up to 45% offshore, they believe that the offshore allocation decision is one that needs to be managed and adjusted continuously.

A summary of their views is that:

  1. Regulation changes to invest up to 45% offshore provides greater flexibility to invest in assets and markets where they can find attractive returns, corresponding with the risk they present.
  2. However, they believe that valuations locally are more attractive than offshore, and they do not forecast they will increase their Regulation 28 funds to 45% soon.
  3. Given starting valuations, they expect SA equities to outperform global equities over the next 10 years.

Looking back, below are M&G’s figures comparing returns of global bonds, SA bonds, global equities, and SA equities over different time periods. The returns shown are real returns (above inflation) in Rand terms.

historical equity returns

M&G Conclusion:

M&G Investment Managers believe the optimal offshore allocation for retirement portfolios is currently 25% to 28%. Allocating higher allocations to offshore assets results in additional risk, causing portfolios to be more volatile. However, they do emphasise the need to constantly monitor the full suite of investment options overseas, and to be flexible in one’s views and ability to increase offshore exposure when opportunities arise.

Allan Gray

Allan Gray address the same question as M&G: Should I invest 45% of my retirement portfolio offshore?

Allan Gray conducted a detailed analysis on excess returns generated by SA equities compared to global equities, and vice versa. Their analysis found that while each sector had periods of outperformance over the other, outperformance is cyclical. They stated “South African equities generated sustained excess returns versus global equities from 1993-95, 2002-07, 2009-10 and 2016-17. Although excess returns in 2021 were only 0.9%, over 10 years investors would still have been worse off by 8% per year had they invested only in South African equities versus entirely in offshore equities.”

Allan Gray Conclusion

Allan Gray conclude that the long-term data illustrates that investing offshore improves portfolio diversification over time and widens the range of opportunities an investment manager can use to generate real returns. Because of currency volatility (see the Chart below), an investor’s suitable exposure to offshore assets will depend on their personal circumstances and investment objectives. A good, independent financial planner can assist you with assessing your personal circumstances and objectives, creating a strategic plan, and implementing the right portfolio mix to reach your goals.

Annualized weekly volatility rand-us dollar exchange rate


Investing offshore is not a straightforward exercise. As seen by the contrasting views and approaches of Ninety One, M&G and Allan Gray, there is no one size fits all solution.

At Investonline, we can assist you with these critical investment decisions, and advise you on structuring your Offshore investments to meet your goals and be as tax efficient as possible.

Please click the link to read further on offshore investing.

Click here to speak with one of our Client Portfolio Managers or call us directly on 021 001 2323.

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