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Talking alternative investments and offshore property

A way for investors to cut out the go-betweens, cut costs and dramatically increase trust, transparency and accessibility: Wealth Migrate CEO and Global Wealth Group chair Scott Picken.

CIARAN RYAN: It’s a sobering thought that JSE returns expressed in US dollars over the last decade amount to just 33%, while the S&P 500 returned 263% over the same period.

That’s a huge difference in returns, and validates those who’ve argued for years that you are better off investing as much as you can offshore. But there are ways to do it right and ways to do it wrong. Where does offshore property fit into the picture or indeed alternative investments and cryptocurrencies?

My name is Ciaran Ryan, and joining us to discuss this is Scott Picken, CEO and founder of Wealth Migrate and chairman of the Global Wealth Group. He’s also author of the book Property Going Global with a foreword by Clem Sunter. This is the authoritative manual on how to safely invest internationally and create global wealth.

First of all welcome, Scott. I’ve just mentioned the huge difference in returns between the JSE and the S&P 500 measured over 10 years. That’s a compelling enough reason, I would imagine, to take as much as you can and invest offshore; but that’s just looking at equity investments. Explain why South Africans should also be considering alternative investments and offshore property as part of their portfolio.

SCOTT PICKEN: Ciaran, thanks very much for having me online; [it’s] wonderful to be able to share with everyone.

I think the most important thing that any investor will be looking at is diversification. And so one shouldn’t just be diversifying across geographies, but also be diversifying across asset classes. One of the guys that I follow, for whom I’ve a huge amount of respect, is Ray Dalio. He specifically goes on and on about diversification across countries, currencies, assets, and to some extent even partners. So when you talk about those type of returns – 33% in South Africa and 263% in America – what one can holistically look at is that, even if you take our property returns, we’ve been helping investors invest in America since 2012. In that time the rand has halved, [American] property prices have doubled and they have earned a consistent 8% net cash-on-cash return.

So I’m not saying that property is better than equities – we could get into that debate all day long – but certainly as an investor one should be diversifying across different asset classes. I know for a fact, from my perspective, they are a helluva lot less volatile and it’s the passive income that the wealthiest investors tend to go after.

CIARAN RYAN: Okay. There are some spectacular alternative investments out there as well, which are focusing on areas such as impact investment and SME lending, just to name a few. Just unpack this for us so we can understand how this fits into portfolio construction?

SCOTT PICKEN: Well, it’s interesting. When you talk about impact investing, 10 years ago that was a nice-to-have, and it was very small, quite frankly; it’s now a trillion-dollar industry. They are called SDGs (sustainable development goals), which refers to sustainable development and protocol projects. The biggest investor in the world is a company called BlackRock, and they’ve come out now and said unless companies are abiding by the SDGs – which are pretty much based on the UN’s 2030 goals – they won’t invest in them at all. So it’s actually become a really important part where you can not only make a profit, but you can also make a purposeful investment.

You talk about SME lending. Funnily enough, I just came off a call with Seedrs, which is the largest equity crowdfunding platform in Europe. We did a raise with them about two years ago – they’ve more than doubled in the last 12 months.

I find it absolutely fascinating how these sectors of alternative investment are becoming more and more attractive.

I was on a call about an hour ago with another group, called The Sun Exchange, that ultimately helps people invest in solar – another alternative investment class. They are also raising very aggressively and getting very good returns. So people are not only getting good returns, but they’re also having a positive impact on the planet.

CIARAN RYAN: Let’s turn now to global property. You wrote the manual on this, the book called ‘Property Going Global’. I suppose it’s safe to say that there are ways to do it right, and probably ways that you can do it wrong – probably more ways that you can do it wrong. Is that correct, Scott?

SCOTT PICKEN: Look, unfortunately research [that] came out about 10 years ago was that 80% of South Africans who invest offshore actually lose money. The point is everyone sends their money overseas, wanting three different things. They are wanting wealth protection, they are wanting a Plan B, and they’re wanting peace of mind. And yet – and I’m not just talking in property, I’m talking in equities and other asset classes as well – more than 80% of people who invested from 2000 to 2010 actually lost money. So you’re a hundred percent correct.

There are many more ways to do it wrong than there are to do it right.

I tend to say to people that the fundamentals of investment in business never change. What I mean by that is that, even though technology can enhance or enable the process, the fundamentals don’t change. That’s actually the reason I wrote the book and was very lucky to have it endorsed by Clem Sunter. I built a four-dimensional model based on Clem Sunter’s scenario-planning techniques, which ultimately provided us with the due diligence. We call it Gidds, the Global Investment Due Diligence System. It’s no better or worse than other systems, but most people make investment decisions based on a gut feel, an estate agent, their brother or their mother. Gidds actually provides them with a framework or a fundamental model to be able to invest properly.

Now, why that is important, Ciaran, is that I tend to say to people that:

… whether you’re investing locally or internationally there are only two things you’ve got to get right. The first one is that you’ve got to have the right information. And the second is that you’ve got to have the right partners.

Although that sounds incredibly simple, there’s a whole bunch of mistakes that people make based on those two different scenarios. Now, bringing technology into that can greatly enhance the process, but it is not a fix-all and you have to have the fundamentals right. That is why the book to this day still stands true, because you’ve got to understand the fundamentals and get it right.

CIARAN RYAN: I’m just curious to pick up on that point where you say 80% of South Africans investing – was it over the last decade? – lost money. Do we know why?

SCOTT PICKEN: I tend to say to people it’s based on a number of things. There are about 10 different principles, and we don’t have time to go through all of them. But the first one is that they react. The president fires the finance minister, the rand falls out of bed and they panic and send money overseas at the wrong times. They are reactive investors versus productive investors.

The second is that South Africans are famous for flying to London to go and watch a rugby game, and they buy a property over the weekend as an investment. I tend to joke and say, how well would a foreigner invest if they came to Cape Town for a week and just bought an asset?

The third is that they get the wrong information. The fourth is that they get the wrong partners. The fifth is that they don’t understand the fees and the costs and they often get caught up with very expensive tax-structuring and compliance. Before they know it, the money that they’ve invested, and I repeat myself – to protect their wealth and to have peace of mind and to be a Plan B – tends to not work out. Often they either leave the money sitting in a bank account, which doesn’t do anything for them, and/or they chop and change. They send money overseas, then they bring it home, then they send it overseas. Unfortunately human sentiment is that you do it at the wrong times, not the right times. And so they lose on both sides of the fence.

CIARAN RYAN: Alright. We’re talking about alternative investments. One of them of course is cryptocurrencies. Should that form a part of any good portfolio?

SCOTT PICKEN: Look, I’m not a financial advisor. I spend a lot of time trying to understand where the markets are going and following some very intelligent people around the world. Cryptocurrency is one of a number of exponential technologies that is going to have an impact on our lives. In fact, cryptocurrency is built on blockchain and many people, including myself, believe that blockchain is going to have a bigger impact on your life over the next 20 years than the internet did over the last 20 years. I will be very conscious to say, though, that it’s in the very formative stages. So test it, try it out, but I definitely wouldn’t be betting the family farm on it. And any good investment, strategy or portfolio, would have a piece of something.

But again, if it’s not what you enjoy and if it’s not what you understand, be very cautious.

CIARAN RYAN: Okay. Wealth Migrate has created a technology platform making it simple for investors to sign on. Just explain how that works and the benefit of doing this in an online way.

SCOTT PICKEN: Again, if you look at any one of the technology companies that have disrupted a whole industry – whether it’s Apple and music, whether it’s Uber and taxis, whether it’s Airbnb and accommodation, whether it’s Robinhood and access to the stock markets around the world – they do three things. They cut out the middlemen, they cut the costs and they dramatically increase the trust, the transparency and accessibility.

What does Wealth Migrate do? It allows you to go online. There are four simple steps. You literally sign up in a compliant way, step number one. Step number two is you fund your wallet. Your wallet is protected by European law. It’s actually backed by the top five banks in Europe, and it’s a digital wallet. You’ve complete control of your wallet. Step number three is you get access to global investment opportunities, not only in South Africa – in Europe, England, America, Australia – and you can then get access to quality institutional partners and their deals. And step number four is you can invest in those deals and you can manage everything online in one place.

So if I come back to what I said about other industries, it has dramatically cut the costs of being able to get access and entry to good-quality partners with good-quality deals. It has dramatically cut out all the middlemen. And, thirdly, it’s increased the trust, the transparency and the accessibility.

CIARAN RYAN: We’re talking about deals there that would involve property, alternative investments, stock exchange. Are there more?

SCOTT PICKEN: Yes. It’s pretty much anything in the primary markets. We closed a deal just last week that is a structured note. Previously you couldn’t get access to those type of quality institutional level investments with less than $2 million. We’ve got property, we’ve got private equity, we’ve got debt products.

And so what’s really, really important for investors is that the true principles of what Ray Dali says – with diversification you now really can diversify across countries, across assets, across currencies and across partners, and yet make it simple and safe with very little hassle, managing it all in one place.

CIARAN RYAN: And what is the website?

SCOTT PICKEN: It’s WealthMigrate.com

CIARAN RYAN: It seems that the range of options available to invest offshore is expanding at an ever-faster pace. What are some of the investment options that are likely to confront us in the coming year or two?

SCOTT PICKEN: I think Ciaran, one of the things is that – and we could do a whole other podcast just on DeFi [Decentralised Finance] and the whole decentralisation that is taking place around the world – the one that I’m most excited about is tokenised property. The reason is that actually on this planet 49% of the world’s wealth is held in property, in real estate, and only 12.7% of the world’s population has access to property.

I fundamentally believe that over time there’s going to be far better accessibility to property using the technologies. But most people, when they hear the word Bitcoin or something, run for the hills. They are completely scared. They’ve got no idea how it actually works or how it’s valued or anything. Things like tokenised property will have the technology of Bitcoin but the underlying asset that people understand.

I think that we’ll go very far to solving some of the greatest challenges on the planet when people can invest, like the top 1%, in world-class quality assets, but with very small minimums and with very small friction cost to be able to get access to it.

So I believe over the next 10 years there are going to be incredibly exciting opportunities and if you’re a highly sophisticated investor you really need to be aware of these trends so that you can take advantage. If you’re just starting out, you too will get access to the same opportunities, just with smaller amounts.

CIARAN RYAN: Alright. I think just to point out that with “tokenised property” what you’d be able to do is own a fraction of a prime property – for example, an address in London, and one of the elite addresses in London or any city in the world – you’d be able to own a tiny fraction of that, right?

SCOTT PICKEN: Exactly, Ciaran. Let’s be frank. I’m already helping people through Wealth Migrate. We’re already helping people invest from R1 000. We’ve actually got a starter pack where people can get started from R100. Our dream ultimately is to get it to $1, and that’s where the accessibility just goes through the roof of more and more people being able to participate.

Again, I use the phrase “top 1%”. A lot of people invest in residential property. That is still a middle-class investment.

The truly wealthy invest in asset classes like commercial property, and yet most people don’t have the access, don’t have the money, don’t have the knowledge. Yet by partnering with people who have already got that track record, you too can get access to those opportunities. You too can get access to the best opportunities. You too can get access to the same returns – however with much lower barriers to entry.

CIARAN RYAN: As a final question on property, because commercial property is in an extremely distressed state at the moment, is that an attractive option for people?

SCOTT PICKEN: Again, there are two ways of answering that. The first one is be very careful. Yes, it is in a distressed state. Again, about which sector are we talking? Are we talking of tourism property? Are we talking of office-space property? Are we talking retail? All three of those are in massively distressed states.

The other way of looking at it is that Warren Buffett and many others would say that when there’s blood on the streets there’s great opportunity. Be fearful when others are greedy and be greedy when others are fearful. I’ve been investing internationally for 20 years and it’s in times like this that you really, truly, can pick up great opportunities that can set you up for many decades to come.

I believe that by partnering with the right partners we can get access to those type of opportunities. And therefore, using the power of the crowd, using the power of technology, Ciaran, you and I and all the listeners can come together and can get access to those type of deals and actually take advantage of where the markets are, and many years from now look back and say, wow, that was an amazing time and I’m glad I took advantage of it.

CIARAN RYAN: We’re going to leave it there. That was Scott Picken, who is CEO and founder of Wealth Migrate and chairman of The Global Wealth Group.

Brought to you by Wealth Migrate.

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