Investors are seeking more investment opportunities than ever before as needs increasingly vary from wanting to protect against currency fluctuations or looking to emigrate, to merely wanting to broaden investment horizons.<\/p>\n
This is according to Jeanette Marais, Momentum Investments CEO and Deputy CEO of Momentum Metropolitan, who was speaking at the recent Momentum Investments Global Matters conference \u2013 an annual event aimed at equipping advisers with insights to enhance discussions about offshore investing.<\/p>\n
\u201cWe live in a global village and as such we\u2019ve seen increased appetite from investors for moving money abroad,\u201d said Marais. \u201cBut given today\u2019s pressing challenges and opportunities, asking the right questions is just as important as giving or receiving the correct advice,\u201d she said.<\/p>\n
Global economic overview: Is there more upside to markets?<\/strong><\/p>\n Speaking at the same event, Andrew Hardy \u2013 Director of Investment Management at Momentum Global Investment Management (MGIM), Momentum\u2019s UK based global investment business, looked at whether this year\u2019s market recovery has already been \u201cpriced in\u201d to markets.<\/p>\n \u201cThere\u2019s no doubt that markets have come a long way towards discounting the global recovery ahead,\u201d Hardy said. \u201cHowever, we think there\u2019s still much more upside potential left for investors, particularly in those parts of the market that were hardest hit by the pandemic sell-off at the start of last year.\u201d<\/p>\n The key risk according to colleague and fellow Investment Director at MGIM, Glyn Owen, is a return of inflation. \u201cIf investors begin to believe that an inflation rise will be persistent, bond yields would likely move materially higher, potentially undermining all risk assets,\u201d he said.<\/p>\n He also spoke of the need to \u201cbalance real assets to protect against inflation with more defensive assets which would perform well in a lower inflation environment.\u201d<\/p>\n But there are other, underappreciated risks facing global markets as Lorenzo La Posta, a senior analyst at MGIM, said.<\/p>\n These included the global lack of creative destruction, investors holding a high proportion of equities, the Chinese government\u2019s reining in of \u201cwild-and-free\u201d tech companies and the democratisation of finance.<\/p>\n Can a local Linked Investment Service Provider (LISP) provide a one-stop-shop for an investor\u2019s offshore needs?<\/strong><\/p>\n According to Hymne Landman, head of Momentum Wealth and Wealth International at Momentum Investments in South Africa, there are a few important things to consider when selecting the most suitable offshore investment solution\/options.<\/p>\n \u201cAlthough client and adviser needs could be met by both local and international platforms, there are certain aspects that need to be thought through when choosing offshore options.<\/p>\n “These include the difference in the fund range available to meet investment needs, the impact of VAT on service and administration fees, the contract structuring options available for succession planning and the tax implications for investment returns,\u201d said Landman.<\/p>\n In addition to this, MGIM portfolio manager Richard Stutley, highlighted the critical role of doing your homework and asking the right questions. \u201cQuestions in your arsenal should include how liquid is your investment, what are its associated fees, and how does it stack up from a sustainability or ESG perspective,\u201d said Stutley.<\/p>\n Can you avoid advice noise, bias and blind spots?<\/strong><\/p>\n Before making decisions around offshore investment options, it\u2019s critical to assess the motivation for these choices. Greg Davies, head of Behavioural Science at Oxford Risk in the UK and Paul Nixon, head of Behavioural Finance at Momentum Investments in South Africa shared the results of a recent study on noise and investment advice, undertaken by Momentum Investments and Oxford Risk.<\/p>\n The results demonstrated that the identical client situation is interpreted very differently by different advisers. Nearly half of the variation seen in the recommendations given to clients by advisers is noise. In other words, it wasn\u2019t as a result of any of the financial and personality information provided to advisers.<\/p>\n Meanwhile, Nixon discussed the role that our biological stress chemical, cortisol plays in investor behaviour. \u201cWhen we are under the influence of cortisol we are less likely to use the logical parts of our brain, which could clearly be problematic for investing,\u201d said Nixon.<\/p>\n \u201cAs a result of COVID-19 related fears, we saw investors switch about R1.5 billion between March and December 2020 and we saw the South African market dip by about 20,000 points,\u201d he said. \u201cAbout R100 million of investors\u2019 money was lost because of people making switching decisions, intervening in their portfolios or exiting their investments.\u201d<\/p>\n Balancing act<\/strong><\/p>\n Arguably portfolio diversification has never been more important. While some see further upside in markets, others see major risks ahead.<\/p>\n \u201cThere are compelling arguments on both sides of the inflation question and there\u2019s no way of knowing who is right. Advice noise, bias and blind spots add further pressure \u2013 there are multiple hurdles investors have to overcome and this is true whether you invest locally or abroad,\u201d said Marais.<\/p>\n \u201cThis once again illustrates the need for a well-balanced portfolio, sound financial advice from a trusted source, composure during times of market stress and a long-term mindset.\u201d<\/p>\n
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