Global Investments. Diversifying Your Wealth

Transcription

1 Global Investments Diversifying Your Wealth

2 It has been said: The world is a book, and those who do not travel read only a page. The same can be said of investing globally.

3 01 Investing Globally 4 02 How Much Should You Invest Globally? 6 03 Why Consider s Global Solutions? 6 Our Global Partners 6 - Brandywine Global Investments 6 - Threadneedle Investments 7 - Fidelity Worldwide Investments 7 04 s Global Fund Range 7 05 s Global Managed Solutions 8 06 How to Invest Globally 8 Rand Denominated Funds 8 Foreign Allowance Funds 8 07 Business Rules 9 Rand Denominated Funds 9 Foreign Currency Funds 10

4 It has been said: The world is a book, and those who do not travel read only a page. The same can be said of investing globally. There is a much larger range of global investment opportunities compared to our domestic set. However, questions about how to invest globally and how much to invest may not always be easy to answer. offers a comprehensive range of global solutions across different regions, asset classes and risk profiles that address a variety of client needs. Investing Globally Build a Successful Portfolio With globalisation becoming an increasingly significant factor in both investment markets and our daily lives, investing globally has become an essential part of building a successful portfolio. By taking advantage of global investment opportunities, you can share in the growth of the world s most profitable industries and also benefit from holding investments in other currencies. Diversification Our research shows that spreading investments across different countries (asset classes, industries and currencies) is an effective way to produce better riskadjusted returns compared to investing only in South Africa. Therefore, the inclusion of global investments is an important part of building a diversified portfolio. Research conducted over a period of 40 years shows that your risk/return ratio improves by 18% if you invest 30% of your assets offshore. This means that a globally diversified portfolio would have produced better risk adjusted returns. 40 YEAR RISK AND RETURN AS AT 31 DECEMBER % 20% Percentage 15% 10% 5% 0% Annuallised Return Annuallised Risk Local Equities Globally Diversified Portfolio (70% Local and 3% Global Equities) Source: I-Net/ Markets around the world offer different levels of growth potential - with corresponding levels of risk and generate their highest returns at different points in the economic cycle. By diversifying your investment across different markets, you increase the possibility of benefiting from another market performing well, while reducing the effect that a falling market can have on the value of your investment. 4

5 Higher Potential Growth There is a much greater range of investment opportunities around the world than in South Africa. According to the International Monetary Fund, South Africa contributes a mere 0.6% to the global GDP (gross domestic product). The JSE comprises about 0.6% of the global stock market index. Thus, by investing globally you gain access to part of the 99.4% of global shares not represented in South Africa. For example, there are no oil producers on the JSE (like Exxon, BP and Chevron), technology hardware producers (such as IBM and Intel), soft drink manufacturers (Coke and Pepsi) or brand-name pharmaceutical companies (Johnson & Johnson, Bristol Myers Squibb, GlaxoSmithKline and Merck). There are many other examples, such as car manufacturers (Toyota, Hyundai, BMW, Volkswagen and Mercedes) or global food manufacturers (Kellogg s and Nestlé). Valuable currency protection Unit trusts holding assets denominated in foreign currencies offer protection against volatility in the rand. World Economic Outlook for 2013 Estimated October % or more Less than 0% 6% - 10% 0% - 3% 3% - 6% no data Source: IMF (International Monetary Fund) 5

6 How Much Should You Invest Globally? Depending on your risk profile, part of your portfolio should be diversified globally in order to reduce its overall risk. How much you should invest globally will depend on your unique situation. Many factors including your risk profile, investment objective and the expected time horizon need to be considered when making an investment decision. Optimal Mix for Domestic and Global Funds The optimal mix for offshore exposure is dependent on your particular risk profile. Research based on the efficient frontier investment curve, which takes risk and return into account, suggests that an allocation of 70% domestic and 30% offshore is generally considered to be an optimal mix. The diagram below sets out the optimal combinations of domestic and offshore exposure based on the maximum potential return for a given level of risk. The optimal mix of assets for the different risk profiles are based on a balanced global portfolio of 60% equities, 25% bonds, 10% property and 5% cash. RISK PROFILE Conservative Domestic 94% Global 6% Moderately Conservative Domestic 84% Global 16% Moderate Domestic 79% Global 21% Moderately Aggressive Domestic 67% Global 33% Why Consider s Global Solutions? Our skills are in proactive, valuation driven asset management. We believe that we can add value through our superior research and rigorous investment process, with a specific focus on asset valuation. We actively seek out assets which trade at levels below their intrinsic value. It is our view that each investment area requires different skills and approaches and hence we create small teams, each with a dedicated focus. These multi-asset teams allow us to appoint talented and passionate people with the specific skills to deliver the best potential outcome for our clients, backed by our rigorous process. We follow the same philosophy in our approach to offshore investing but where necessary, we complement our in-house skills by partnering with experienced offshore asset managers who share the same valuation-driven approach. Our Global Partners Brandywine Global Investments We have partnered with Brandywine Global Investments, a boutique fixed interest asset manager, to manage our global fixed interest portfolios. Founded in 1986, Brandywine Global Investment Management manages $42 billion in assets as at 31 December The firm is a wholly owned, independently operated subsidiary of Legg Mason, Inc (NYSE: LM), and is headquartered in Philadelphia with an office in San Francisco. Brandywine Global also operates an affiliated company, Brandywine Global Investment Management (Asia) Pte Ltd, with an office in Singapore. Their mission, to seek value not yet recognized by others, is the core principle behind their work and is reflected in their culture, strategy and day-to-day decision making process. Brandywine applies a top-down, value-driven process when structuring global income portfolios. Real (inflationadjusted) yield is their primary measure of value. Currency valuation is next in importance, as the real yield must be captured in US dollars. They focus on appreciating, undervalued currencies and overvalued currencies that can be hedged. Inflation trends, political risks, monetary trends, and business cycle and liquidity measures are also considered. Brandywine typically concentrate investments in 8-16 countries that appear to offer the best total return potential. Aggressive Domestic 67% Global 40% Source: It is essential that you understand fully what your objective is to determine how much of your investable assets should be exposed to global markets. You need to determine this with your financial adviser and also determine your risk appetite which will guide you on how much global exposure you should have. 6

7 Threadneedle Investments In managing our global equity portfolios, we have partnered with Threadneedle Investments, a leading international investment manager with a strong track record of outperformance across asset classes. They manage 84.0bn (as at 31 March 2013) of assets, investing on behalf of individuals, pension funds, insurers and corporations. They are the 3rd largest UK retail fund manager and the 7th largest UK fund manager by assets under management. They are ranked in the top 30 in Europe. Established in 1994 in London, Threadneedle has a presence in 16 countries. Threadneedle is owned by Ameriprise Financial (NYSE: AMP), a leading US diversified financial services company with over US$708bn in owned, managed and administered assets. Threadneedle s distinctive investment approach is based on creative thinking, sharing of ideas and rigorous debate. Their 150 investment professionals cover developed and emerging market equities, fixed income, commodities and UK property. Fidelity Worldwide Investments We have partnered with Fidelity Worldwide Investments to manage our Global Managed Solutions and foreign currency funds. Our Global Managed Solutions each comprise of a carefully selected combination of portfolios from the Fidelity International range. The structure provides access to Fidelity s global network of investment management and research expertise. Fidelity Worldwide Investment (FIL Limited) was established in 1969 and provides asset management services to investors all over the world. They have portfolio management and research staff in 11 financial centres around the world and offices in 24 countries. Fidelity International and its subsidiaries manage assets worth $248.2bn (as at 31 March 2012). The cornerstone of Fidelity s investment approach is research. As well as studying financial results, analysts and fund managers visit companies, meet their managers and talk to suppliers, customers and distributors, giving the investment team a clear 360 view of each company they invest in. s Global Fund Range BUILDING BLOCK FUNDS MANAGED FUNDS FOREIGN ALLOWANCE CASH BONDS EQUITY PROPERTY ASSET ALLOCATION Euro Cash Fund Sterling Cash Fund US Dollar Cash Fund Global Bond Fund Global Equity Fund Global Property Fund Global Aggressive Fund Global Balanced Fund Global Conservative Fund CASH BONDS EQUITY PROPERTY ASSET ALLOCATION ASSET SWAP (Rand Denominated) Euro Currency FoF US Dollar Cash FoF Global Bond Feeder Fund Global Equity Feeder Fund Global Property Feeder Fund International Aggressive FoF International Balanced FoF International Conservative FoF 7

8 s Global Managed Solutions Our Global Managed Solutions are aimed at investors who seek a diversified investment portfolio but want the asset allocation decisions taken on their behalf. They offer simplicity and full-time professional management of investors money. Investors do not need to rebalance their portfolios themselves, as this is done by the fund manager. LONG-TERM STRATEGIC ASSET ALLOCATION Global Conservative Fund Property 15%-25% Equities 15%-25% Bonds 20%-40% Cash 40%-60% GLOBAL CONSERVATIVE FUND The Global Conservative Fund is managed on a cautious basis. The Portfolio has the lowest weighting in equities (15-25%). It offers the investor a more conservative level of capital growth than would otherwise be expected from a fund with a higher equity component. Global Balanced Fund Property Equities 5%-10% 40%-50% GLOBAL BALANCED FUND The Global Balanced Fund s assets are managed in order to minimize risk but at the same time expose the investor to assets within geographic regions and sectors that have the most potential. The Portfolio has the second highest equity weighting of the three managed portfolios (40-50%). This gives the Portfolio a higher potential for capital growth than the Global Conservative Fund but at a slightly higher risk rating. Bonds 20%-30% Cash 15%-30% Global Aggressive Fund Property 15%-25% GLOBAL AGGRESSIVE FUND The Global Aggressive Fund invests mainly in growth stocks located in geographic regions and sectors that have the highest growth potential. The Portfolio has the highest equity weighting of the three managed Portfolio s (65-75%). This gives the Portfolio the highest potential for capital growth but at the same time slightly higher volatility levels can be expected. Equities Bonds Cash 65%-75% 10%-20% 5%-10% How to Invest Globally You can either invest in our rand denominated funds or invest in our foreign domiciled funds which are denominated in foreign currencies. Our rand denominated range of funds is an easy and effortless way to diversify offshore. You do not have to apply for foreign allowance clearance and your application does not have to be approved by the South African Reserve Bank. You get all the benefits of investing globally and dealing with a South African institution without having to physically take your money offshore. On the other hand, if you would like to invest in foreign currency and be able to use the proceeds of your investment offshore to fund a child s education or retire abroad then it is worth investing in our Jersey-based foreign denominated funds. Rand Denominated Funds STRUCTURE Voluntary Investment such as a Unit Trust Fund Retirement Annuity/ Preservation Plans Linked Life Annuity MAXIMUM OFFSHORE ALLOCATION Unlimited 25% of total portfolio 25% of total portfolio Voluntary rand denominated investments have no monetary limit in current legislation Monthly debit orders can be used to make use of rand cost averaging Easily accessible, as you do not have to apply for foreign allowance clearance Investing in rand denominated offshore investments offers protection against a depreciation in the rand Foreign Allowance Funds STRUCTURE Voluntary Investment MAXIMUM OFFSHORE ALLOCATION R4 million foreign allowance Foreign allowance investments are subject to a R4 million maximum per individual per annum Useful for South African residents who already have money offshore or would like to utilise their foreign allowance Foreign currency investments makes it easy for you to transact with foreign accounts, as long as those accounts are in your name Investing in funds denominated in foreign currency offers protection against a depreciation in the rand 8

9 Business Rules Rand Denominated Funds CHARGING STRUCTURE Upfront Service Charge Service Charge Management Intermediary Annual Asset Management Company Service Service Management Service Charge (No Total Service Charge (A) Charge (B)^ Charge (A+B) VAT applicable) (C) Charge (A+B+C) Cash Funds 0.00% % 0.50% 0.00% 0.50% 0.20% 0.70% Bond Funds 0.00% % 0.75% 0.50% 1.25% 0.50% 1.75% Property Funds 0.00% % 0.70% 0.30% 1.00% 0.60% 1.60% Managed Funds 0.00% % 0.85% 0.50% 1.35% 0.60% 1.95% Equity Funds 0.00% % 0.85% 0.50% 1.35% 0.60% 1.95% Note: ^ The upfront service charge is negotiable with intermediaries. The figures in the above table exclude South African VAT of 14%. Maximum Upfront Charge: The Upfront Charge is split between the intermediary and the management company (60% intermediary and 40% management company). The upfront charge is negotiable with intermediaries The upfront charge is deducted from the full investment value and the remaining amount is allocated to the selected investment options. Commission paid to intermediaries is incorporated in the initial charge. Any additional investment will incur an upfront charge. Please refer to the latest fund fact sheet(s) for more details Net Asset Value (NAV): Prices are calculated on a NAV basis, which is the total value of all assets in the portfolio including any income accrual and less any permissible deductions from the portfolio divided by the number of participatory interests in issue. Permissible deductions include brokerage, MST/UST, auditor s fees, bank charges, trustee/ custodian fees, RSC levies and the annual management charge levied by Collective Investments Limited. Annual Service Charge (levied monthly incl. VAT): The annual service charge for the individual portfolios is accrued daily and levied monthly on the market value of the portfolio. Please refer to the latest fund fact sheet(s) for more details. The annual service charge is normally deducted from the income received by the portfolios. Switching: A switch involves selling participatory interests (units) in one portfolio and investing the proceeds in another portfolio. Collective Investments Limited does not normally charge initial charges twice, other than in instances where the original investment was in a portfolio with lower charges than the portfolio into which the investor is switching. Accordingly, the investor will have to pay in the difference in the initial charges. However, the investor and the representative (intermediary) may agree on a different arrangement to that mentioned above, in which case an initial charge as agreed between the investor and the intermediary, will be charged on the switch transaction. As costs may change from time to time, please consult with your authorised intermediary. TURNAROUND TIMES New Business Switches Redemptions Minimum Investment Amount Minimum Debit Order amount * Day means business day 3 Days 2 Days 3 Days R5000 R500 9

10 Foreign Currency Funds CHARGING STRUCTURE Upfront Service Charge Management Company Upfront Charge Intermediary Upfront Charge^ Management Company Service Charge (A) Intermediary Service Charge (B) Service Charge Annual Management Charge (A+B) Asset Management Service Charge (No VAT applicable) (C) Total Service Charge (A+B+C) Cash Funds 0.00% 0.00% % 0.75% 0.25% 1.00% 0.20% 1.20% Bond Funds 1.00% 0.00% % 1.00% 0.25% 1.25% 0.50% 1.75% Property Funds 1.00% 0.00% % 0.85% 0.50% 1.35% 0.60% 1.95% Managed Funds 1.00% 0.00% % 0.85% 0.50% 1.35% 0.60% 1.95% Equity Funds 1.00% 0.00% % 0.85% 0.50% 1.35% 0.60% 1.95% Note: ^ The upfront service charge is negotiable with intermediaries. The figures in the above table exclude South African VAT of 14%. Documentation Required for Individuals: Limited and Fund Managers Jersey Limited require the following documents: Application form (to be completed by all applicants) Original certified copy of proof of identity (for each applicant) including the following: A legible photograph and the signature of the applicant A statement from the certifier: The photograph bears a true likeness to (name of applicant) Original or originally certified copy of verification of residential address (for each applicant) not older than three months Tax Clearance Certificate MP1423 Balance of Payment Proof of payment Where an account holder requires a third party to have authority to sign on the investment, we will need a general Power Of Attorney (POA), which specifies that the POA also applies to jurisdictions outside the Republic of South Africa. We also require proof of identity and verification of residential address for all signatories on the account. Original documentation is required for all new clients. TURNAROUND TIMES New Business Switches * Day means business day 3 Days 2 Days Redemptions 7 days to receive the proceeds Minimum Investment Amount $2500 Minimum Subequent Investment Amount $1000 Important Note: The value of units in the class funds depends on the value of the underlying assets, which may fluctuate. The value of assets and income on those assets may also be affected by fluctuation in currency rates and, in some markets, exchange control and fiscal regulations. Hence the capital value of the units may fluctuate and is not guaranteed. The purchase of a unit in a currency fund or the other funds is not the same as placing funds on deposit with a bank. The Manager has no obligation to redeem units at the amount of the original investment. The funds do not pay dividends. Income is capitalised and can only be realised by selling units. Please note: The full set of business rules is available on request. 10

11 Disclaimer and Statutory Disclosure The price of each unit of a domestic money market portfolio is aimed at a constant value. The total return to the investor is primarily made up of interest received but, may also include any gain or loss made on any particular instrument. In most cases this will merely have the effect of increasing or decreasing the daily yield, but in an extreme case it can have the effect of reducing the capital value of the portfolio. Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. An investment in the participations of a CIS in securities is not the same as a deposit with a banking institution. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from Collective Investments Ltd (the Manager). Commission and incentives may be paid and if so, would be included in the overall costs. A fund of funds is a portfolio that invests in portfolios of collective investment schemes, which levy their own charges, which could result in a higher fee structure for these portfolios. Forward pricing is used. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. Liberty is a full member of the Association for Savings and Investments of South Africa. The Manager is a member of the Liberty Group of Companies. The Portfolios of the Offshore Unit Trusts scheme, with the exception of the Managed Fund Portfolios, are Feeder Fund Portfolios which only invest in the participatory interests of a single Portfolio of a collective investment scheme. The Managed Fund Portfolios within the Offshore Unit Trusts scheme are Fund of Funds Portfolios which only invest in other collective investment schemes, which levy their own charges, which could result in a higher fee structure for these funds. In addition to the annual management charge, other fees are incurred by the trust (trustee, custodian and general expenses). There is no sales tax applicable in Jersey. Commission and incentives may be paid and if so, are included in the overall costs. A schedule of fees and charges and maximum commissions is available on request from Standard Bank Fund Managers Jersey Limited, ( the Manager ). The portfolios of Offshore Unit Trusts scheme are accumulation portfolios and do not distribute income. Please refer to the prospectus of this scheme for more details, a copy of which is available on request from Collective Investments Limited, ( ), the address of which is 17 Melrose Boulevard, Melrose Arch, 2196, South Africa. The registered office of the Manager is Standard Bank House, La Motte Street, St Helier, Jersey, Channel Islands. The Trustees are Capita Trust Company (Jersey) Limited, 12 Castle Street, St. Helier, Jersey, Channel Islands. Standard Bank Fund Managers Jersey Limited is regulated by the Jersey Financial Services Commission to conduct Funds Service Business and is a wholly owned subsidiary of Standard Bank Offshore Group Limited, whose registered office is La Motte Street, St Helier, Jersey, JE2 4SZ. Collective Investments Limited Reg. No. 1969/003468/06 Compliance number: DR

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