Most asset managers weren’t pushing up against the offshore investment limit – and don’t plan to be now that it’s been hiked.
Almost all the South African money managers quizzed by Today’s Trustee reveal that they had not reached the 30% limit for offshore investments in recent years.
This puts the spotlight on why Finance Minister Enoch Godongwana felt the need to raise the limit to 45% in his February budget, when the existing provisions weren’t even being maximised.
Stanlib, which managers R659bn in assets, says that from its analysis, most funds had not used up the full allowance for tactical reasons.
Marius Oberholzer, Head of Stanlib’s Multi-Strategy team, says he believed that while asset managers have increased their offshore allocations in recent years, this is unlikely to hit that 45% limit. “The feedback we have received is that an offshore exposure of 45% is too high for a typical Regulation 28 [pension fund] portfolio, due to the increase in volatility and currency risk,” he says.
The ideal offshore exposure, an analysis from one of Stanlib’s consultants shows, is probably between 35% and 40%.
In most cases, it’s far below that. Across Stanlib’s multi-strategy assets, it has less than 25% of assets invested offshore. In its balanced portfolios, the offshore exposure is between 26% and 28% – and Stanlib hasn’t shifted more assets offshore yet.
Allan Gray, which manages about R100bn in retirement assets, says that before February, about 27% of its funds were invested offshore. After Godongwana’s budget speech, its offshore exposure has even dipped slightly to 26.7%.
It’s a very similar story at Coronation, which only increased its offshore exposure to about 25% at the end of April 2022, following weakness in global markets (thanks to roaring inflation and Vladimir Putin) and the relative out performance of South African equities. Coronation manages R298bn on behalf of South African institutional investors, most of which are retirement funds.
However, there were others who have used, or plan to use, this avenue more frequently.
Momentum’s Deputy Chief Investment Officer Eugene Botha says that before February, more than 25% of its total portfolios were invested offshore, with the more aggressive multi-asset-class portfolios already at the maximum allowable offshore exposure, which was 30%. Botha’s view is that over time, the offshore exposure will ratchet up to between 30% and 40%.
Darryl Moodley, Head of Tailored Investments at Sanlam, which manages R100bn in retirement fund assets, says his institution’s offshore allocation was 28.3% before February. Though it hasn’t really changed much since then, Moodley notes there are plans to increase his institution’s offshore allocation.
