By Craig Sher, Discovery Invest’s Head of Research and Development
Discovery recently launched an enhanced version of their Discovery Global Endowment product, a competitive medium- to long-term global investment solution for South Africans seeking to invest globally.
Increasing your global exposure offers three main benefits: geographical diversification, currency diversification, and access to new opportunities.
These boil down to protecting your wealth by spreading your risk, that is, not limiting your portfolio to one currency, region, or limited sectors relative to the global market.
Discovery is known for its innovation, strong behavioural-economics approach and shared-value business model – but not everyone understands how these play out in the context of investing.
Craig Sher explains:
What does ‘shared value’ mean?
Discovery’s business model is built on shared value, which means creating products that benefit clients and society, while also benefiting the provider of those products.
In investing, we know that the earlier you start and the more you invest, the longer your money has to grow and the better off you become.
Discovery also earns fees for a longer period, off larger investment balances. We channel the surplus profit these extra fees create back into rewards that encourage our clients to manage their money wisely.
So, investors gain from smarter consumer behaviour, and Discovery benefits from a profitable business model. At the same time, this benefits society, as fewer people become dependent on others or state resources.
How does the exchange-rate enhancer work, and what value does it offer?
Simply put, our actuaries calculate the total profit that someone who invests in an offshore platform with Discovery will make for us over 10 years. We then take a portion of this profitability and channel it into an upfront exchange rate enhancement.
For example, if the current exchange rate is R17.34 to the US dollar, you could buy in to our Global Endowment at around R16.13 to the dollar – you’d get a discount on whatever the rate is at the time.
So, no matter when you start an offshore investment with us, you always do so at a more competitive exchange rate than the prevailing market rate.
Does this just apply to US dollars – and does any other company offer this innovation?
None that we know of – that’s why we call it a world-first. Discovery Invest offers an entry-point currency discount like this with US dollars, British pounds and euros.
Does the currency-enhancing benefit come with extra administrative costs?
It comes at no extra cost. What makes our model so powerful is that our fees are competitive with other local platforms – it’s simply your commitment to the time frame that we bank on for the extra value.
In fact, we found that this feature exceeds all the costs of administration over a 10-year period, which makes our offering one of the most cost-effective global endowments on the market today.
Even without the exchange rate benefit, the platform is very competitive. The enhanced multi-contract structure of our Global Endowment offers full liquidity and flexibility; it’s tax-efficient; and it allows for multiple owners and beneficiaries, which eases the intergenerational transfer of assets.
We also have solutions in association with BlackRock and Goldman Sachs Asset Management – world leaders in asset management – and offer a combination of active asset managers and a passive blend of index trackers and share portfolios.
This gives investors access to a full range in which to capture opportunities across the globe and achieve strong risk-adjusted returns within a given appetite. Plus, we’ve made choosing funds very simple with our risk-profiled solutions.
Add to all of this our intuitive, fully-digital platform, and we believe we’ve brought all the best features of global investing to South African investors.