Henk Appelo and Sarmishtha Haribhai : Liberty
The interconnectedness of the global Investment landscape along with the ease at which global markets are now able to transact among themselves has created a growing interest in offshore investing by local investors searching for better diversified returns.
Investing offshore allows local investors to benefit from the profits generated by top global companies like Apple and Facebook in the US, and SAP and Airbus in Europe for example. Not only this, it protects against currency fluctuations should the investor decide to take their money offshore, although it is possible to invest in overseas companies while still keeping your money in the country which in itself has some advantages in terms of liquidity and simplicity.
The local investment environment is seen in some cases as being at the mercy of corruption, as well as political and economic uncertainty, and this has shifted the mindset of investors who are always looking for new opportunities, not to mention stability for their funds.
As well as the higher returns being generated by offshore economies, rapidly growing offshore companies and funds offer better growth prospects in the long-term.
Liberty offers a variety of portfolios ranging from tracker funds to actively managed funds offered through STANLIB and their offshore partners. The access to market leading managers like Brandywine Capital and Columbia Threadneedle Asset Management is an opportunity for local clients.
The commitment to engage top global managers with solid track records is key to getting the best out of overseas investment opportunities for South African investors. Ultimately, the intention is to provide clients with both active and passive solutions to more appropriately complement or enhance their existing investment portfolios.
It is obvious that investing offshore allows the investor the benefit of diversification. You can spread your risk as you have greater access to different investments in different countries with different economies and opportunities.
With Liberty’s Offshore Investment Plan for example, you can invest in offshore index trackers, which include equity, bond and cash trackers. The cash index trackers are offered in various currencies. Investing in tracker portfolios gives you the ability to access different asset classes at a low cost. Also, you can choose to have a fund manager grow your money by making the investment decisions for you.
It is important to consider the legalities of tax in relation to offshore investing. For example, with our Offshore Investment Plan being an endowment, the returns will be subject to income tax at a current rate of 30% and an effective capital gains rate of 12%.
Foreign dividends will be subject to withholding taxes at different rates and local dividends will be subject to dividends withholding tax at 20%. The proceeds from this investment will generally be regarded as capital in nature and exempt in your hands as an investor.
The preferential tax rates applicable to this particular plan will work to the advantage of any earner in a higher tax bracket. Also, investors will not be adversely taxed on currency fluctuations. This all allows your funds to have more opportunity for growth.
Investments in the Liberty Offshore Investment Plan are a lot less complicated because they still fall under the South African legal jurisdiction. This means that, should you as the investor and policyholder pass away, your loved ones don’t have to comply with any potentially complicated or costly foreign legal requirements.
The legalities of investing offshore are complex, and really this depends on the individual investor’s taste for risk and how they view the opportunities being offered in the long-term.
The information contained in this document does not constitute advice by Liberty. The material has been created for distribution to intermediaries only and is not for distribution to the public.
Any legal, technical or product information contained in this document is subject to change from time to time. If there are any discrepancies between this document and the contractual terms and conditions, or where applicable, any fund rules, the contractual terms and conditions, or where applicable, the fund rules will prevail. Past performance cannot be relied on as an indication of future performance. Investment performance will depend on the growth in the underlying assets, which will be influenced by prevailing market conditions. Any recommendations made by an adviser or broker must take into consideration their clients’ specific needs and unique circumstances.
Liberty Group Ltd (Jersey branch) is the Insurer of the Offshore Investment Plan and an Authorised Financial Services Provider (no. 2409). Terms and Conditions apply.
For more details about benefits, definitions, guarantees, fees, tax, limitations, charges, premiums/contributions or other conditions and associated risks, please speak to a Liberty Financial Adviser or your Broker.