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Look ahead, not behind you, when making your offshore investment decisions

10 February 2020 3:16 PM
What is considered perfect timing for investing outside of SA? We find out when to do it, how long to be there and when to get out

Offshore in Context - In partnership with Coronation Fund Managers is a three-part podcast series hosted by CapeTalk breakfast host Refilwe Moloto, which explores the world of offshore investments with Pieter Koekemoer, Head of Personal Investments at Coronation Fund Managers. By the end of this series, investors can expect to understand all there is to know about the basics of investing outside of South Africa. Subscribe so that you don't miss out on the series.

In this episode, we learn about emerging vs developed markets and passive vs. active investing, but more importantly why a multi-asset approach to investing may be the best vehicle for investors with which to stay committed as we look towards the next decade.

When investing, be wary about your ability to forecast the future

The last decade was a US story. US markets performed very well relative to local assets over the last 10 years and this is what South Africans are currently fixated on when thinking about their future investment destinations.

But while developed markets have been a clear-cut winner in the most recent decade, the first decade of this millennium was an emerging markets story. Emerging markets performed significantly better than developed markets over this 10-year period, which serves as a cautionary reminder that nobody knows exactly how future events are going to play out and the only way to achieve a robust investment portfolio is to be well diversified.

Where’s the future value?

Given where we are at the moment, there is an argument to be made to be somewhat underweight the US and a little bit more overweight emerging markets given relative valuation levels.

But if you think about conventional wisdom in the South African context again, many investors would have argued that they don’t want too much exposure to emerging markets in their investment portfolios because we live in one. However, there are supporting arguments in favour of having emerging markets exposure in your portfolio as a South African investor.

Considering that the majority of the world's population live in emerging markets there are trends that are supportive of structural long-term growth. This includes significant opportunities owing to demographic dividends, formalisation of economy benefits and the increasing sophistication in the development of financial markets.

Pieter Koekemoer, Head of Personal Investments – Coronation Fund Managers

Given that many emerging markets also have more fragile economies, and as a result have more interventionist governments that dictate how you can invest, what is likely to happen over the next decade or two is that you will see a normalisation and increasing sophistication in the quality of the financial markets in these countries. This could mean that there would be a further boost in demand for those markets.

But you don’t have to worry about the choice between emerging markets vs developed markets

As an investor, it is not necessary for you to worry about whether to invest in emerging markets or developed markets; whether you should have more exposure to the US or to China; whether you should have more equities or more bonds; whether you should invest in cash, or consider in-the-gap type asset classes.

The fundamental benefit of investing in a multi-asset class fund is that your fund manager makes those decisions on your behalf and across a wider base. So there are more opportunities to preserve your capital and to add value to your portfolio in an actively managed multi-asset fund. We also think it is much easier for you to remain committed in a multi-asset fund, as arguably the most important thing that you need to get right as an investor is to stay the course through the tough times so that you can benefit from the good times. Because nobody exactly knows when and how quickly that will happen.

The world is yours. To diversify offshore and grow your wealth with Coronation Fund Managers, visit Coronation Offshore. Coronation is an authorised financial services provider.

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