Following announcements in the recent Budget speech, the South African Reserve Bank (SARB) has confirmed that the offshore investment limits for all investment and product providers, including retirement funds, have been aligned and set at 45%, effective immediately.
This is very positive news for South African investors over the long term, especially for retirement fund members, as it represents a significant relaxation in exchange control regulations, which allows for greater diversification and flexibility to benefit from the global opportunity set.
What does this mean for your investments?
- All investors in retirement products, including the Allan Gray Retirement Annuity, Preservation and Umbrella Funds, can now invest up to 45% of their portfolios offshore (up from 30% outside of Africa plus an additional 10% in Africa ex-SA previously).
- Unit trust companies, such as Allan Gray, can invest up to 45% of their client assets under management offshore (from 40% outside Africa + 10% for Africa ex-SA previously). Therefore, the offshore investment limits for local unit trusts that are mandated to invest offshore, including those that comply with the retirement fund regulations (Regulation 28 of the Pension Funds Act), are increased to 45%. This means that the portfolio managers of our Equity, Balanced and Stable funds now have greater flexibility when it comes to making asset allocation calls. As always, decisions regarding the level of offshore exposure will continue to be made according to our assessment of where the best value can be found over the long term.
Always make considered changes
The welcomed revised offshore limits give you more flexibility in your decision-making. However, it is important to remember that before making any changes to your portfolio, you should think carefully about your long-term goals, objectives and capacity to take on additional risk. You may wish to talk to a good, independent financial adviser regarding any changes to your portfolio that you may be considering.