We note Magnus Heystek’s opinion article entitled ‘How to plan for a dreadful retirement’.
We would like to correct Mr Heystek with the following general comments:
– South African Reserve Bank (Sarb) regulations separately restrict Allan Gray Unit Trust and Allan Gray Life to investing 40% of assets held on behalf of retail investors offshore. These entities are not allowed to exceed these limits. The restrictions that we have put in place on offshore allocation for some of our unit trusts and some of the products underwritten by Allan Gray Life, such as our Living Annuity, are in place to comply with Sarb regulations.
– It is important to note that individual investors in these products have no restrictions imposed by the Sarb on how much they may allocate offshore. Since the entities through which they invest via these products are limited to 40% offshore, this can create the potential for misalignment between individuals’ specific preferences and what each Allan Gray entity is able to facilitate. In managing our offshore capacity at Allan Gray, we always try to balance the needs of each individual investor, whether existing or new, so that our products meet the needs of most clients in a way that is fair.
– We believe in the importance of offshore diversification in a manner which is appropriate for each individual’s risk tolerances and overall objectives. Where we are not bound by exchange controls, we will do what we can to make it easier for clients to invest as much as they need to offshore. We have recently lowered the minimums on our offshore platform, and we can facilitate currency conversion through an authorised dealer.
Referring to some specific comments made by Mr Heystek:
– The offshore restrictions for Living Annuities issued by Allan Gray Life referred to in the article have been applied to existing and new investors in this product. We were very deliberate in not favouring new clients at the expense of existing clients. In fact, existing clients whose offshore exposure in their Living Annuities exceeded 60% before the limits were put in place have been able to maintain their offshore exposure at whatever they had before the restrictions were implemented. The restrictions are therefore more likely to impact new business than existing business. It is important to note that we were compelled to apply these restrictions to ensure that Allan Gray Life does not breach the 40% of assets regulation.
– Mr Heystek would prefer to have 100% of assets abroad. The limits imposed at Allan Gray are set at a level that (i) ensures that Allan Gray Life is able to comply with the limit of 40% imposed by the Sarb and (ii) gives most investors the opportunity to have an offshore allocation that meets their long-term needs.