Offshore investments from a South African resident's perspective

Grant, David Ronald (2003-03)

Assignment (MComm)--University of Stellenbosch, 2003.

Thesis

ENGLISH ABSTRACT: The offshore investment industry has shown tremendous growth (R92,7 billion invested in offshore unit trusts and mutual funds) since the Minister of Finance took the bold step (1 July 1997) availing South African (SA) residents the opportunity to invest offshore. Currently, SA residents, subject to certain criteria, are allowed to invest R750 000 offshore. The primary objective of this assignment is to provide a general overview of offshore investments from a SA resident's perspective. Foreign investment policies as they relate to local residents are reviewed. Investment maxims, truisms and theory are introduced to provide a theoretical framework to accommodate future chapters. The question regarding why South Africans should invest offshore is answered by firstly identifying specific risks that are unique to this country, its people and businesses and, secondly, by looking at market risk. Conclusive empirical evidence states that offshore diversification reduces portfolio risks and enhances returns. Offshore investments, their related costs/fees, investment strategies as well as regulations that offshore investors must adhere to, are also discussed. The most important obstacles to investing offshore, namely the home bias phenomenon and currency or exchange rate risk, are placed in perspective. Important tax implications for investing offshore are also briefly mentioned. In the final chapter conclusions and recommendations are made.

AFRIKAANSE OPSOMMING: Die buitelandse beleggingsindustrie het merkwaardig gegroei (R92,7 biljoen is tans in buitelandse effektetrusts en onderlinge fondse belê) sedert die Minister van Finansies die dapper stap geneem het (1 Julie 1997) om Suid-Afrikaanse (SA) burgers die geleentheid te bied om in die buiteland te kan belê. Huidiglik kan SA burgers, onderworpe aan sekere kriteria, tot R750 000 in die buiteland belê. Die primêre doelwit van hierdie werkstuk is om 'n oorsig vanuit die SA burger se perspektief voor te lê. Buitelandse beleggingsbeleide, asook hoe hulle SA burgers beïnvloed is in oënskou geneem. Beleggingsgrondstellings, -waarhede en - teorieë, is bespreek om 'n teoretiese agtergrond te verskaf vir latere hoofstukke. Die vraag waarom Suid-Afrikaners in die buiteland moet belê, word beantwoord deur eerstens, spesifieke risiko's wat uniek is aan ons land, sy mense en besighede, te identifiseer, en tweedens, om na markrisiko's te kyk. Konklusiewe empiriese navorsing bewys dat buitelandse beleggings die risiko's van portefeuljes verlaag en opbrengste verhoog. Buitelandse beleggings, hul verwante koste/fooie, beleggingstrategieë, asook regulasies waaraan buitelandse beleggings moet voldoen, is bespreek. Die belangrikste struikelblokke vir belegging in die buiteland, bekend as die sogenaamde "home bias"-verskynsel en val uta- of wisselkoersrisiko's, is in perspektief gestel. Belangrike belastingsimplikasies vir buitelandse beleggings word ook kortliks genoem. In die finale hoofstuk word gevolgtrekkings en aanbevelings gemaak.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/53534
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