MIX 93.8FM – Interview with Al your pal
We’ve got a couple of visitors in our studio this afternoon, I would like to welcome Michael & Mauro. First of all, let’s just tell people where you’re from, you’re from Global & Local Investment Advisors and you guys are the Directors of Global & Local and you also give advice as far as investment is concerned and that is exactly what our Mix FM listeners are going to be entertained to this afternoon.
Michael I’m going to start with you, we’ve heard your radio advert being played on here MIX FM over the last few weeks, there were even talks of emigrating or emigrating your money by investing offshore and earning returns in foreign currency, this is very interesting.
Tell us a little bit more about that.
Good afternoon, it’s a lovely afternoon to have your money offshore.
South Africa is a beautiful country, we love it, we are positive, but right now the clouds are out there, Eskom is dark, economy is flat, government coffers are bare. It will get better, but don’t put your eggs all in S.A. Of world markets overall, South Africa represents a tiny portion. Hong Kong is bigger than us, it’s crazy. Our only opening to invest Offshore is with our in-house company old age funds, a Pension fund. By law you can only invest a third of your pension offshore, it’s not enough. In South Africa, there’s around 1800 funds you can enter into. Offshore, there are over 98000. In South Africa, shares on our markets, there are around 400. Offshore, there are 630 000. Our markets are too small.
If you invest Offshore, you hedge your Rands against Dollars, Euros, Pounds and Yen. You make your element of risk less. If you invest Offshore, you can have money in America, Europe, Asia, China, Japan. We also add in a mix, we do a bit of India, Vietnam, wherever. If you spread the risk, you can potentially earn more and have a better Pension one day.
Which is important I suppose and looking at our local markets, I think investing offshore is definitely the right way to go, isn’t it?
I’m going to go to Mauro now, I want to find out from you Mauro, how does one invest offshore?
There’s basically 2 ways.
The first way is, you take a South African unit trust that invests Offshore, that is a South African based fund, sometimes called “Asset Swap” funds. The Unit Trust manager in this case uses their own license to invest offshore. You as the investor will invest Rands into this Unit Trust and you would be exposed to Offshore markets. When you withdraw, the capital is invested obviously in foreign currency, but when you withdraw, the money comes back to you in Rands in your own local bank account.
The other method is to physically externalise your capital and that is to make use of the discretionary allowance of R1 million per year. If that’s not enough, you can take out more, up to R10 million, but then you would have to apply for a tax clearance certificate from SARS.
In this method the invested capital is converted to foreign currency and physically invested Offshore in an offshore fund. The benefit of this is that should you wish to redeem or take your money out of this fund, the capital can be paid to you in any bank account in the world as long the bank account is in the investor’s name.
Now Michael I’m going to go back to you because this all sounds very complicated and first thing I think is how do I invest overseas? Do I get hold of you guys at Global & Local to assist me with my investment?
Number 1, we’re in this industry now for 20 years, this is what we do, we eat it, sleep it, drink it. Everything we recommend, we have entered our own assets in there for at least a year so if there’s pay, we also have it.
So, any client who has Offshore funds, how Mauro and I work, we analyse what they have, the good the bad, the ugly of it, leave it or look at other options. Within SA, same thing, a client walks in – says I have R100 000, what’s the best for us?
We have an in-house team analyse a number of funds and looks for options on those. We can also help clients move their Rands into Offshore currencies in a very easy and efficient way. The other way is if a client has Offshore Dollars or Pounds, whatever it is and is entering it back into Rands, we can also aid in that.
Lovely. Mauro, tell us what the benefits are of investing offshore?
So effectively you are exposed to 2 different ways of creating growth on your capital when you invest Offshore.
Firstly, there’s the Rand to Foreign currency exchange.
For example, if an investor invested R100 000 when the Rand was at R12 to US $1 and now that the Rand is closer to R15 to the US $1, he would have grown that capital to R125 000 purely on the currency, that’s all.
The second way is the actual performance of the fund that the capital is invested in. So again, if we use that example, R100 000 invested 3 years ago converted to US Dollars, he would have had $8,300. And let’s say that the fund grew by 8% per year in US Dollars. That $8,300 would have been $10,400.
If we then convert that $10,400 back to SA Rands, it would have been R156,000.
So, there’s two ways to actually look at it. One is the Foreign currency; the depreciation of the Foreign currency increases a return in Rands and what the actual fund that the capital is invested in and how it grows.
Michael, I’m going to turn back to you. Can you tell me are the investment risks much higher when investing in an offshore market?
There’s always a risk in everything; like a local option, offshore options, you have a myriad of options and it really depends on your wants, needs and how long you entered into an option. We’ve got low risk, medium, high and very high, those ones I wouldn’t recommend. Whatever we offer is specifically for your needs, so if you are age 25 and 85, it’s going to be completely opposite.
Lastly, whatever we advise on is in writing. We give all the ins and outs of each option and we give you enough info so that you can make an informed decision. Thank you.
I’ve got a SMS that came in, before I close the interview, it’s from Simone. She says what is the minimum amount I can invest overseas or that you guys can invest overseas for me? And can I start with a small amount and can I add to my account as I get more funding?
I have a wonderful answer for this from Mauro.
The amount depends on what we are looking for and how we do it, but it can start from as low as R500 a month. Typically, if we are doing a “proper” offshore investment where we are externalising the capital, we can do that from R10 000 a month upwards and any capital amount can be added at any time.
So, there we go, there’s your answer. You can invest as little as R500 a month.
It’s been a lot of information that you guys have passed through in this very short time. Should anybody need more on Offshore investing, can they contact you Michael & Mauro?
You are able to at any time and it isn’t only us, at our office we have a team of 26 to help.
Let’s give out your office number – 011 486 2500 and if people want to check out your website?
There we go so go check it out. Then I’m going to play you a song, apparently you guys requested a couple of songs from us this afternoon.
Thank you very much for coming into the studio, thanks for having a chat with us.
Once again if you want to go and check out their website – globallocal.co.za or go and check out their Facebook page. They happy to help you and as that question came through, you can invest as little as R500 a month.