Investing offshore has only in recent years gained real urgency and attention by South African investors. There are two main reasons for this.
Firstly, the JSE had, for the most part, kept pace with international markets. Average returns on the JSE approximated average global developed market returns in foreign currency terms. As such, South African savers were keeping pace with their investing counterparts in developed countries. This scenario has changed significantly over the last 5 years. The S&P 500 has, for example, gained 67% over the past 5 years while the JSE is down approximately 10% in US dollar terms. Just let that sink in. That is almost 80% divergence. It not only points to the destruction of SA wealth (in dollar terms) but also a massive missed opportunity if you did not allocate funds offshore during this period.
Secondly, South Africans have mistakenly believed offshore investing was too complex and therefore out of bounds. Many believe it’s too expensive, too risky and too complicated. This is simply not so.
A stock market is for many people their long-term nest egg. It is where a chunk of your life savings goes (through pensions etc) to give you a comfortable retirement and ultimately your dependents a financial boost when you pass on.
So how does South Africa’s main stock market, the JSE, rank in international terms. There are 60 major stock exchanges in the world with a total value of approximately $70 trillion. 16 exchanges have a total market capitalisation of over $1 trillion. The JSE is not one of them. The total market capitalisation of all exchanges in Africa is approximately 1% per cent of the global total.
What the aforementioned does is put into perspective the importance of allocating a portion of your investment saving into offshore markets. At Evolution Investments we believe long-term savers should be allocating upwards of 50% of investment savings into offshore markets.