Fund Basics
Offshore investing: Building resilience beyond returns
For South African investors, offshore investing is often framed as an opportunity for returns: a means of accessing faster-growing companies, stronger currencies, or markets that may outperform our own. While these are valid considerations, the more enduring case for investing offshore is not centred around trying to predict which market will lead in the year ahead, but rather around building a portfolio that is less dependent on any single country, currency, sector or economic outcome.
Ultimately, the value of offshore investing lies in the resilience it can add to a client’s financial plan
A broader world of opportunity
South Africa offers investors access to several high-quality companies and sectors. Yet it remains a relatively small and concentrated market in the context of the global investment universe. A portfolio invested solely in local assets is exposed to the same domestic economic cycle, policy environment, currency and sector composition. Even a well-diversified JSE portfolio can retain meaningful exposure to a limited number of industries, particularly financials, resources and locally focused businesses.
Offshore investing expands the opportunity set. It provides exposure to countries at different stages of their economic cycles, currencies with different drivers from the rand, and industries that are less well represented on the local market. Global equity markets offer access to leading technology platforms, healthcare innovators, global consumer brands, semiconductor manufacturers, defence companies and many other businesses that play only a limited role, if any, in the South African market.
Diversification that works harder
Diversification matters because it is not simply about holding more investments. More significantly, it is about owning assets with different drivers of return. When one region, sector or currency experiences a downturn, exposure to other parts of the world can help cushion the effect on the overall portfolio. Investing always involves uncertainty, so the objective is not to eliminate risk, but rather to avoid relying too heavily on a single source of return.
Currency is a useful example. The rand can be volatile, particularly during periods of domestic uncertainty or heightened global risk aversion. Offshore assets introduce foreign currency exposure, which can provide an important counterbalance in a South African investor’s portfolio. Over shorter periods, currency movements can amplify gains or losses in rand terms. Over longer investment horizons, however, offshore exposure can help protect the purchasing power of capital by reducing the exclusive reliance of a portfolio on the local economy and currency.
Beyond the developed world
It is equally important to recognise that offshore investing is not a one-way bet on developed markets. Advanced economies such as the United States, Europe and Japan offer depth, liquidity, well-established corporate governance and access to investment in many of the world’s leading businesses. At the same time, emerging markets can provide exposure to different sources of growth, including expanding middle classes, infrastructure investment, innovation and favourable demographic trends.
The appropriate mix should not be driven by headlines or recent performance alone. Investors should be wary of chasing whichever region, sector or currency has performed the best lately. A disciplined offshore allocation should instead reflect an investor’s objectives, time horizon, risk tolerance, existing local exposure and broader financial circumstances.
Start early, stay invested
For investors taking their first steps offshore, starting early matters. Building exposure gradually allows time for the benefits of diversification and compounding to work. It also reduces the temptation to make a large offshore allocation only after the rand has weakened sharply or when global markets have already enjoyed a strong run. In practice, the best time to establish offshore exposure is usually as part of a long-term financial plan, not in response to a short-term market event.
This does not mean that offshore assets will always outperform local investments. South African assets can remain an important part of a diversified portfolio, particularly where investors have local spending needs and liabilities. The question is not whether to choose local or offshore investments. It is how to combine them thoughtfully.
A well-constructed portfolio recognises that the future is intrinsically uncertain. Different countries will lead at different times, sectors will move in and out of favour, currencies will strengthen and weaken, and economic conditions will evolve in ways few investors can predict consistently. Offshore investing can help ensure that a portfolio is not built on a single view of how that future will unfold.
Ultimately, the value of offshore investing lies in the resilience it can add to a client’s financial plan. Returns remain important, but the broader purpose is to create a portfolio with numerous sources of growth, more ways to manage risk and a stronger foundation for achieving long-term goals.
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