We understand that many investors are keen to invest offshore but neglect to do so as they find it too daunting. Johann Grandia discusses some of the characteristics and workings of Allan Gray's offshore platform.
Over the past few years the South African Reserve Bank (SARB) has relaxed foreign exchange controls, making it considerably easier for investors to take money offshore. If you wish to invest directly into offshore funds, but prefer to use a local administrator rather than have to open accounts with several offshore managers in different jurisdictions, you can do so via a locally administered offshore investment platform, such as Allan Gray's.
Ease of administration and transparent, competitive fees
Working through an offshore platform has significant advantages for investors, particularly if it is administered locally.
The Allan Gray offshore platform is simple and easy to deal with. The platform can process instructions for several funds at the same time, sent to a single address, with local telephone and fax lines for instructions and physical offices. Investors can invest or transfer cash or existing offshore investments to the platform without the need to repatriate them first. Our secure website (the same website through which existing clients manage their other Allan Gray investments) offers easy reporting and online transacting.
For estate planning, an offshore investment on our platform can be dealt with locally in the estate under a South African executorship. The investment will not be subject to the administrative complications of estates law in offshore jurisdictions or require the appointment of an offshore executor, as is the case with many offshore-domiciled investments. This simplifies matters considerably for the deceased's South African executor.
Platforms offer unit trusts from a range of different investment managers and can be thought of as a ‘unit trust supermarket’ – a one-stop service through which you can access any of these unit trusts, while dealing with only one company. Platforms are able to negotiate discounts in fund management fees because they invest in bulk, and these discounts partly or even sometimes fully offset the extra cost of convenient administration.
You can invest using one of these methods:
1. Invest online
Log on to www.allangray.co.za, click on ‘Invest now’ and select ‘Offshore funds’. Follow the application process to submit your investment online.
2. Download an application form
Fill in the Offshore application form available via our website www.allangray.co.za or from our Client Service Centre. If you need any assistance, you may wish to contact an independent financial adviser.
3. Contact our Client Service Centre or your financial adviser
Call 0860 000 654 or email info@allangray.co.za.
You will also need to obtain tax clearance
You will need to obtain a tax clearance certificate from the South African Revenue Services (SARS), get approval from the South African Reserve Bank (SARB), and convert rands into foreign currency. To help streamline the process, we have negotiated with Peregrine FX (Pty) Ltd (PFX), an independent foreign exchange provider, to provide you with preferential rates for foreign exchange services. PFX facilitates the foreign exchange and offshore transfer process, including applying for tax clearance certificates, currency conversions from rands into any of our accepted offshore currencies and transferring foreign currency into our offshore bank accounts. If you wish to make use of the foreign exchange administration services of PFX, indicate this during the ‘Invest now’ process or on the application form. Allan Gray earns no direct or indirect benefit from your use of PFX services but we have tried to negotiate the best fees we can from them on your behalf.
The primary aim of our platform is to offer investors convenient service across a simple range of funds and to reduce the high direct and indirect costs of international investing. The platform allows you to make investment decisions that are not influenced by opaque and inconsistent fee structures. We charge an annual fee for administration. This is reduced by the manager fee discount, which is an amount that a fund management company may pay Allan Gray to account for the benefit of having its funds distributed via the Allan Gray platform, as well as the money it saves by having Allan Gray do its administration through bulked investments. We pass this discount back to you.
OUR PLATFORM HOPES TO REMOVE SOME OF THE ANXIETY AND MYSTIQUE SURROUNDING THE OFFSHORE INVESTMENT PROCESS
South African regulation
Allan Gray's offshore platform is domiciled and regulated in South Africa. The regulatory regime in our country is rated amongst the best in the world. Under South African regulation, the Allan Gray platform investors' assets have to be held in the name of Allan Gray Nominees Proprietary Limited, a single purpose company that has a majority of independent directors and is tightly regulated by the Financial Services Board. Because you are invested through a protected nominee company, your money is safe from Allan Gray's creditors.
Since we are a South African company the platform can be impacted by changes to the South African foreign exchange regime. You may take some comfort in the fact that although Allan Gray is a locally registered company, your investment is in foreign assets and in foreign currency. When you wish to make a withdrawal, we can transfer your investment to an offshore bank account registered in your name, without any further SA exchange controls.
Independent fund ratings to help you make your decisions
With a huge selection of funds available globally, we have committed to making a manageable number available through our offshore platform. The funds are selected through a combination of recommendations from independent financial advisers (through an annual fund survey) and, more recently, also through research conducted by international, independent fund ratings company Fundhouse. Fund ratings add an extra layer of comfort for investors and advisers when selecting funds.
All the funds on our platform were invited to participate in Fundhouse's fund due diligence process. Fundhouse applies a bespoke, qualitative approach based on a fund manager's investment philosophy, investment process, business structure, team and alignment of past investment decisions. The funds are then rated according to three tiers based on the research methodology. Tier 1 is the highest rating and means that Fundhouse is confident that the unit trust is managed according to a well-considered, consistently applied process. Tier 2 is similar to Tier 1 in most respects, but Fundhouse may be concerned about some of the aspects of the underlying investment processes. A Tier 3 rating means that Fundhouse is concerned about several aspects within the investment proposition.
All rated funds will undergo an annual rating review. This is done to identify the impact of any changes to the fund's investment philosophy, process or business structure that could have taken place during the year. We will endeavour to have all new funds that come onto our platform rated. Please contact your financial adviser, or our Client Service Centre on 0860 000 654 if you need more information.
For many investors, investing offshore is fraught with uncertainty. Our platform hopes to remove some of the anxiety and mystique surrounding the offshore investment process. However, at Allan Gray we do not offer financial advice. If you are not comfortable making your own investment decisions you may wish to consult with an independent financial adviser.