How rich South Africans are protecting their money

According to Henley & Partners, many high-net-worth individuals (HNWIs) are increasingly seeking ways to diversify their assets and reduce exposure to local risks, which include a weakening currency, high taxation, and political uncertainties.

Offshore investments provide access to international sectors and industries, such as technology, healthcare, and renewable energy, that are poorly represented locally.

This enables them to benefit from growth opportunities unavailable within the South African economy, thus lowering their risk profile while gaining exposure to stronger, more diversified economies.

“There’s been a major increase in geopolitical risk,” said Stefan Engelbrecht, portfolio manager for Mazi NexGen at Mazi Asset Management. 

“The uncertainty since the start of the year has made it harder to manage retirement portfolios. But the worst thing you can do is constantly react. 

Engelbrecht advised sticking to one’s investment process and remembering that economies tend to recover, even from political turmoil.

Chris Eddy, head of investments at 10X Investments, agreed with Engelbrecht. “From US-China relations to Trump’s trade policies and court rulings, the volatility is high,” he said. 

Among the key risks right now, the pair pointed to inflated US equity valuations, the weakening dollar, and political instability in major markets like the US. 

Eddy highlighted that US equities are in the 90th percentile of historical valuations, and the dollar is still expensive. Those factors suggest that future returns are likely to be muted.

Locally, while South Africa faces fiscal pressure, high real interest rates offer an opportunity. “You can get inflation-plus-5% on local bonds,” said Eddy. 

“That’s extremely attractive, especially when you compare it to historical equity returns of inflation-plus-6.5% over 100 years.

Despite this, experts agree that keeping most of your investment portfolio in such a small economy is not a good idea. 

“South Africa only makes up about 0.3% of global markets, so relying solely on it makes little sense,” said Eddy.

Hedge against the rand

Engelbrecht agreed and said putting all your money in one small economy just isn’t rational. “Diversify across geographies, stick to your valuation metrics, and avoid flip-flopping between styles or reacting to headlines.”

He added that looking global doesn’t just mean defaulting to the US. Engelbrecht warned South Africans against overconcentration. 

“For years, people thought global meant the US. However, real diversification means spreading risk across various geographies, including Europe, Asia, and emerging markets.

Efficient Group chief economist Dawie Roodt agreed and noted that there are still many investable companies on the JSE.

However, he stressed that investors should stick to highly liquid stocks that they can sell at short notice if needed.

He said South Africans should invest in companies that provide a rand hedge to protect them from the currency’s depreciation.

A rand hedge stock is a company listed in South Africa that earns a significant portion of its earnings outside the country in dollars, euros, or pounds.

Examples of these companies include Naspers, Prosus, Richemont, Anglo American, AB InBev, BHP Group, and Glencore, among others.

Roodt added that, with the South African rand weakening, investing in precious metals like gold, silver, and platinum is seen as a way to preserve wealth​.

Ultimately, the experts said that staying calm amid the noise is the best strategy during times of uncertainty.

“Investing is simple, but it’s not easy. Emotion is your enemy. Sometimes the best decision is to do nothing at all,” said Engelbrecht.

“Build a well-diversified portfolio, manage risk wisely, and focus on your long-term goals. That’s how you protect your wealth,” Eddy added.

Issued on BusinessTech by Malcolm Libera | https://businesstech.co.za/news/finance/829017/how-rich-south-africans-are-protecting-their-money-2/