PineBridge Investments: Trend in SA investors looking to multi asset portfolios as offshore option
PineBridge Investments says investing offshore is becoming an increasingly attractive option to many South African investors.
“Taking a multi asset approach to offshore investing can potentially offer better returns at lower risk. This is because investors can have exposure to more countries, regions, currencies and companies. Likewise, a multi asset approach enables investors to dynamically change their allocation across risk factors, geographies, asset classes and sectors. The complexity lies in having the ability and skill sets to understand the various markets and shift allocations in order to take advantage of the underlying opportunity set” says Hani Redha, Portfolio Manager, Global Multi-Asset at PineBridge.
Recent political turmoil has led to volatility in South Africa’s banking sector, as well as bond and currency markets. PineBridge Investments says this will only increase the trend of South African investors looking to increase their offshore exposure via multi asset strategies, enabling them to better diversify their asset allocation to maximise returns and reduce risk. “An additional benefit of taking a multi asset approach is to minimise country and currency risk. Currency depreciation can have a negative effect for an investment strategy with seemingly superior local returns being negated through currency depreciation. For instance, the latest South African turbulence has seen the rand give up nearly all of the 10 per cent appreciation it held against the US dollar in 2017, potentially inflicting damage on undiversified onshore portfolios,” added Mr. Redha.
“By considering offshore markets and taking a dynamic multi-asset approach, South African investors can also diversify their allocation from local markets where valuations could be at very high or record levels to markets with more realistic valuations and better growth opportunities,” he said. “The PineBridge multi-asset, or dynamic approach, means that your portfolio can get greater diversification across asset classes, regions and currencies. This is a more complex solution as the manager needs to decide on a top down allocation across countries, asset classes and currencies while at the same time making a bottom up allocation to specific instruments and companies in the different countries, asset classes and currencies.”
“Once an investor has a clear investment objective and understands the benefits of allocating a portion of the assets offshore, an adequate multi asset investment strategy can then be developed,” concludes Mr. Redha.