MENU
 
 Registered users can save articles to their personal articles list. Login here or sign up here

The shocking truth about the JSE

And your dwindling pension fund returns.

My comments last week about Regulation 28 and the stranglehold that it imposes on retirement fund managers and ultimately your investments drew the usual acerbic, in some cases nasty, reactions from the Moneyweb community. I don’t mind comments as long as they are reasoned and well-informed.

Over the many years that I have been writing this column, I have learnt a lot from some of these comments. Many readers also tell the same story: the comments sometimes are better and more entertaining than the column.

A small group of readers seem to think that some of my articles are unpatriotic and disloyal. Some have blatantly told me to “f**k off and  leave the country” if I don’t like the way things are. I wouldn’t know where to go as our family has been in this country for almost 160 years. And I most certainly will not be joining robertinsydney in Australia as another has suggested.

Capital controls

Many readers don’t seem to understand that Regulation 28 is a direct consequence of capital controls, which were imposed on South African investors by the apartheid government in 1960 in the wake of the Sharpville massacre. Although they have been changed, and considerably relaxed in many instances, we do still, as individuals and institutions, invest and move money in and out the country under very strict guidelines and control of National Treasury and the Reserve Bank.

Any such controls are political in nature. It is undeniable that exchange controls have, by and large, served the political objectives of the ruling party of the day. This also, over time, tends to impoverish people and investors. It seems that many investors don’t fully realise this.

In 1970, for instance, you received $1.40 for a rand. By 1980, the rand had weakened to 1:1 and today you get 7 American cents for one rand… an astonishing weakening of the currency over time. Some years ago, Paul Hansen from Stanlib sent me some calculations which showed that your investment returns from 1980 to 2011 (or thereabouts) would have been double had you been able to invest your money fully offshore; in this case the US American market where he was a stock broker for many years.

Let me repeat that: double!

And then, as I said last week, Treasury (which decides on the foreign investment allowance for retirement and other SA-based investments), has the temerity to blame the high fees of fund managers as a major contribution to under-funding of future retirement.

Defenders of any form of control over the flow of money, which includes Regulation 28 insofar as it relates to trillions of rands in retirement funds, also tend to use pseudo-nationalistic arguments, the same kind of arguments I heard when growing up in this country, but in a slightly different context.

Patriotism, we used to joke during the so-called Border War in the mid-Seventies, was defined as your Nationalist member of Parliament who was ever-keen to sacrifice your life for his country… It seems as if defenders of Regulation 28 are quite willing to sacrifice your future pension for their short-term political objectives.

And so I spent some time over the weekend analysing the performance of the JSE All Share Index against similar indices representing the performances of investment markets in Europe, the USA, Asia, the world as well as its emerging market counterparts, just to compare like-for-like. I compared it in rands over five, three, one years and even six months and one month. I also did the same comparison in US dollars. The result was identical.

Great was my astonishment (see table and chart) to see the JSE lagging over every period in this comparative study, both in rands and in US dollars.

I knew that the JSE had been underperforming over longer periods but thought the recent strengthening of the rand might have boosted the comparative performance over shorter periods, but this was not to be. Even the stronger rand could not conceal the putrid performance of the JSE over the past 12 to 18 months while the rand was strengthening against foreign currencies.

What is concerning is that the JSE is now not only lagging the indices of the developed world but is also now lagging, by a far distance, the Emerging Markets Index, of which it is a major constituent.

Source: Investec

Source: Investec

This development is of great concern. It suggests to me that global institutional investors are massively underweight in SA relative to the other emerging markets, such as Turkey, Brazil, south Korea and others.

Source: Investec

See for yourself, dear reader. I don’t like what I see but that is not going to prevent me from commenting about this. And we are talking about the future retirement benefit of millions of people who don’t always fully understand why their pension funds are not growing and beating inflation.

JSE (Pty) Ltd under pressure

It therefore comes as no surprise to me that JSE (Pty) Ltd, the listed company operating the local stock market is feeling the pinch and needs to cut costs and staff fairly dramatically as was announced recently. Global fund managers have been massive sellers of equities out of the local equities market (approximately R270 billion) over the last 18 months or so. They are selling and not buying something else, it would seem.

Add to that the estimated R80 billion remitted by local investors to offshore investment markets via their offshore investment allowances over the same period of time. This represents a huge loss of business to the local bourse, which must be nervously watching offshore investment bourses moving their cheese….

In our practice, we have been witness to this trend. I cannot recall when last we invested money in a local equity portfolio while the demand for offshore investments has been massive. Any local money goes towards income and perhaps bond funds.

Most of the large local financial institutions will tell the same story. Magda Wierzycka from Sygnia this week revealed the local investment flows are drying up and that she is looking for opportunities in the UK. Will she be accused of disloyalty to her country? Or will she be told to  pack her bags and go back to Poland, where she came from as a youthful refugee?

I hope not, as she is one of the view that institutional fund managers come out and admit to the torrid state investment companies are currently experiencing. Others are trying to drum up local business with fairly desperate marketing and advertising campaigns, suggesting, time and time again, that “now is a great time to be investing”.

It is my experience that many would prefer not to publicly discuss this trend, which has been unfolding over a period of time (more than six years now). It might just lead to massive withdrawals from investment portfolios where such withdrawals and re-alignments are allowed.

Investments locked in 

I often meet investors over the age of 55 who have substantial amounts of money locked up in badly performing pension/provident/preservation and retirement annuity funds. In most cases they have not been advised to consider alternatives to move funds from such restricted portfolios to unrestricted portfolios such as a living annuity or even a full withdrawal. They are often not even aware that there are alternatives available to them which could possibly improve their investment outcomes.

I don’t have a certain line with regard to my columns. I am not pushing one investment in favour of the other. In fact, I try not to offer investment advice per se.

I look at the facts and comment on them. The facts at the moment make for depressing reading and it would be astonishingly irresponsible of me to recommend certain investments ahead of better-performing ones based on non-factual sentiments.

What about the argument that by recommending offshore investments I (and the participating investors) are depriving the local economy from much needed investment and job creation opportunities? There is a certain element of truth to that but the governing party should be creating the economic environment that attracts capital and offers the chance for free enterprise to flourish, which it isn’t.

Capital flows to where it is made to feel welcome.

In fact, government and its misguided economic policies over many years have been destroying capital through investor unfriendly policies, rampant corruption and the sheer stupidity of a president who is clueless when it comes to running a modern-day economy.

Until such time that these macro-variables change, I will simply speak truth to the facts.

As they say: “You are entitled to your own views but not to your own facts.”

*Magnus Heystek is investment strategist at Brenthurst Wealth. He can be reached at magnus@heystek.co.za for ideas and suggestions.

Read more from Magnus:

How Zumanomics is crashing your retirement

Investment advice from the tea boy

A blueprint for financial survival

COMMENTS   77

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

“Some years ago, Paul Hansen from Stanlib sent me some calculations which showed that your investment returns from 1980 to 2011 (or thereabouts) would have been double had you been able to invest your money fully offshore; in this case the US American market where he was a stock broker for many years.”

Is the limitation* for not taking your money fully offshore then and now, the real exchange controls?

Forget Reg 28, that’s something you buy into voluntarily for a tax benefit (and if not informed enough to have been aware of that, that’s not Reg 28s fault, and if “forced” by your employer to be in such, well that’s between you and employer).

*the other limitations being information on how and where and there being few easy to use products, that are cheap enough, for the average man (R150 000 to R500 000 pa income brackets, more than that you are above average), which is of course a good thing for Magnus, he can charge fees for that info and experience. Hopefully, with the help of technology, soon it will be cheap and easy to put money directly into overseas ETFs/mutual funds for the average man. It’s already much easier to invest in SA feeder UTs and ETFs that track foreign indexes.

This is the biggest problem, I for instance have an enforced % subtracted for provident fund contributions. I get the tax benefit but otherwise the fund has had below inflation returns for 2 years now, the only hope there is the compounded tax benefit paying off after 30 years.

The cost and quantum required to invest offshore is also restrictive, I’m not sure how many local investors have R100k + to invest in one shot into a overseas account.

What would be ideal is to invest in hard currency in a offshore account but this is very expensive and you have to jump through a ton of loops to get there.

Precisely why I say it’s between employer and employee (government is not involved there), at least if I had a problem with Reg28 I could lower the contributions to the Provident Fund to 5% of salary with my employer, and use the other 10% (ok, less than that due to the increases PAYE I’d have to pay) however I see fit.

According to the data we have access to, the performance of S&P500 vs ALSI (both total return) from 1 Jan 1980 – 31 Dec 2010 is pretty much neck and neck. Rolling the same starting date to end at 30 Jun 2017 ain’t pretty for the local market (S&P500 more than double cumulative return – not annual return. Big difference!), but if you change your start date to the beginning of the 70’s then once again the returns (1 Feb 1970 – 30 Jun 2017) are pretty much the same. Starting 1 Jan 2000 the returns of the ALSI are way in excess of S&P500…

Choosing the period of review can have a MASSIVE impact on the outcome. An experienced author/analyst is generally able to easily get the ‘data to talk’ and get the desired outcome ‘proved’

A typo, or just an order of magnitude mistake:

“…today you get 0.7 American cents for one rand”

That would be 7,7 American cents.

Not that it affects the point that Magnus validly makes…

Thank you for pointing out the error, it has been corrected.

Elementary my dear Watson…

I also read the article and immediately understood what Magnes meant as:

USD/ZAR is 13.0250 at the moment

This means 1 USD = 13.0250 ZAR and the inverse

1 ZAR = 0,0768 US

I have been reading you for the past 20 years (I think you went dark for a little while) and I must say you may be one of the last of a dying breed that tell it like it is!!

And even some funds are trying to drum up local and international business with fairly desperate marketing and advertising campaigns, suggesting, time and time again, that “we can get you at least a 25% return in dollar terms by investing in Sub-Saharan Africa funds”.

The problem is that Africa and South Africa stubbornly hold on to corruption and ill fated ideological thinking and the leaders think that they were elected to be monarchs.

Badly performing local RA’s are just that = BAD! I am astounded that my RA could only muster 0.86% growth per year over 3 years!

Section 28 has hindered my ability to secure a pension for myself. If it were not for my shares in Capitec, Naspers, SAB etc I would have zilch!

And my 1 lumpsum RA with AG did 6.05% per year (inception date 30 Sept 2014), my monthly RA with Coro did 7.3% per year (inception date 1 March 2013), and employer fund with 10X did 6.5% per year (inception data 1 Jan 2013).

So the 3 years AG fund didn’t do too badly against the 2x 4 years funds with their very good 2013 year. Then I also can figure in the tax benefits.

That’s why you got the RA, for the tax benefit and the other benefits too, right? If you don’t want those benefits (and thus having to be in Reg 28 funds) you can stop contributing and put all your money elsewhere.

Maybe relook at what asset classes and % of those asset classes your RA is in, and how expensive the funds you are in are.

Magnus, so far so good on your advice on off shore investing with Vanguard and property in Ireland.

Losers will always complain about good advice never adhered too.

I’ve never been a fan of the Reg28 nor the active industry !
I count myself lucky that I live in this time period where I got access to really cheap ETFs and overseas exposure (DBX/Itrix/S&P)

I’m shocked… robertinsydney hasn’t replied yet

He’s probably drowning his sorrows by consuming countless XXXX because he failed to listen

Oh he will! No doubt he will tell you how well he as done and how he and his family are way ahead of anyone. Watch this space. The pain will make his presence known – shortly!

Well at least I didn’t sink my wealth into a Hout Bay McMansion – which is now unsaleable!

@seriously. Hilarious! Even after you call him out he cannot help but comment….proving you 100% correct.

Hopefully Moneyweb moderators have taken up my suggestion of blocking him from the comment line. His comments have had no value in the context of the articles and have simply been personal spite.

Actually I am followed & applauded by people who although living in close proximity – u wouldn’t even know exist!

You are right Magnus.Truth will remain a truth.No matter what.

And Gemini is also quiet…what is this world coming to??

Bobsmith remember, markets go up for years, or flat or down for years. The JSE had glorious before the last 3 years. The US market was flat 2000 to 2010, then doubled over the last 7 years. Your timing was just bad. The last 3 years was bad for everyone in on the JSE.

Looking at the future, I agree with Maggie, where is our growth going to come from?? Our politicians won’t alow growth. It’s a Western concept…

Apologies Cj1 – I had a early morning meeting… I have never once said it does not make sense to invest offshore … Just use cost effective products – Not expensive channels that add zero value – Also as bad as Reg 28 is at least you get a tax deduction – So I will still use it to bring down my effective tax rate – Discretionary monies will go offshore except for a few exceptional SA shares – Living annuities are not subject to reg 28 so they can be 100% offshore – Although, unless you are connected like MH I doubt of the product suppliers will allow you to do so – Not sure if you and MH have been following the Gupta leaks news – You must be devastated by the fact that some many wonderful 1st world listed companies have been implicated in paying bribes? Many of the JSE companies have substantial offshore earnings – Why not comment on the directors leading these companies – JSE listed company directors are some of the most highly paid in the world (apparently because they are in high demand else where in the world)- Yet they continue to receive huge pay increases and bonuses while the companies continue to perform poorly – Just how many SA companies are successful overseas? Only a few – Most of them have failed dismally – Shock horror – I do agree with MH on one point – The SA government (a term I use losely) must do its part to install confidence in the economy.

You don’t need special connections to invest your living annuity 100% in offshore funds. I have found that most SA clients prefer to invest their money in South Africa under the illusion that they can keep a watchful eye on their money. So even though they can take their money
offshore they simply don’t.

Always a good read for Monday morning. I definitely agree there is a case for lobbying the government to change Reg 28. My RA has gone up by 3.7% p.a over the last three years yet inflation has been +/-6%. In US$, it has gone down by ~1% p.a. Looking forward, where is growth going to come from?

What is contained herein is the symptoms of amongst other the result of SAs (in my view) monetary policy and in fact internationally. The question; is the JSE or any other stock exchange as productive as it is suppose/professes to be. There is limited aggregate demand, which is a result of low fixed investment and all the accompanying calamities. What we need is a radical change in for instance monetary policy; think like what will happen if borrowing rates are reversed, i.e. borrowing rates for larger corporation becomes progressively more expensive, favouring the smaller business with cheaper rates. Larger business after all can afford it and have had the benefit of “discrimination”. It is very dangerous to concentrate on monetary performance only, maybe the focus should be last year we sold so many tons of dental creams and our growth is increased tonnages for this year?

As we know, stats can be used any way you want to support your argument. Lets focus on some concepts instead, some of which have been made.
a) Investing offshore is not unpatriotic – if the benefits are repatriated and spent here, then this is positive for the country. It is only negative when you emigrate and the capital is no longer owned by SA residents (consumers/taxpayers)
b) Reg 28, whether it is currently good or bad, serves a different purpose – it gives a tax break for a well diversified retirement plan. You may debate the offshore allowance in terms of well diversified, but doesn’t affect the purpose of the regulation.

To me this article is the previous one inverted, so my view remains the same. Buying into markets that are expensive, and bailing out of a cheap market like SA does not make sense at this point. I do not invest in funds, I select my own stocks, mostly small and mid caps. Some have earning yields above 20% now, try finding that in the US/UK.

I do not care if foreigners buy our stocks or not. Ultimately these very high earnings will be very high dividend yields relative to price, the share prices do not worry me. I am able to live off dividends at a relatively young age, this would not be possible if I was investing in foreign funds or stocks on P/E’s of over 20.

The more negative things are sounding in SA the more excited I am getting about some of the stocks I am picking up at the moment. Any positive news will be a bonus, but the yields even now are enough.

100%, The capital growth component of the shares is not important in the short term, it is are you buying good quality shares at good prices? I’m getting the impression that MH wants us to avoid SA shares because the future is terrible in SA. I disagree on that view, because I cannot predict which country will succeed or fail.

SA shares are cheap at the moment so I’m a buyer, but only because my overall portfolio is globally diversified already.

I 100% agree with MH though that reg.28 is bad for you in the long run.

Amazon us UP 50% over 6 months – my cancer biotech – 125%

Who would invest here?
1. Low growth and productivity
2. High interest rates and inflation
3. Mining and Land charters with AA
4. Dumb and uneducated median voter
5. Corruption and cronyism
6. State owned enterprises failing
7. Politically questionable
8. Low investment and savings rate
9. High taxes and the inept Davis commission-want Danish style taxes here!

We offer the global investor nothing. Only folk who are coming here are yield chasers and when the liquidity event comes -eish-run for the hills

Magnus is correct-invest with societies that are entrepreneurial, educated and growing .

The same points hold true for a lot of other countries, except maybe for the high interest rates and inflation. I suggest you go travel a bit.

I have travelled enough to know that I have choices with the decision where to invest my money . Just read what Magnus is saying….invest your money where there is a good probability of a good return. The fact that Uganda has similar issues to SA does not make it an INVESTMENT case.

Eish-you are clearly one of the median voters of this sad land!!

I agree with you 100% Magnus. So essentially, at a high level, we all work within an economy strangled by a corrupt and highly inefficient govt – whilst at the same time being prevented from seeking pension growth outside of it.

Magnus

You are, of course, correct to point out the facts.

Where can I find the Cumulative return for the JSE for periods 1975 to 1985 and 1985 to 1995 and then 1995 to 2005 (Madiba era)?

Far too young to really know, but recall my father doing very well on JSE during the 70’s and 80’s periods of (relative) financial stability

Is this not just a cyclical thing? SA is badly managed and the world does not like us very much?

look up the 100+ years of returns study from Dimson, Marsh and Staunton. On a real return basis SA was one of the best performers over a very long time period. You can pick up an article on MG about it if you don’t want to delve into the academia.

However, I feel that you could have just as easily ended up in the poorly performing economies, or maybe history was very different perhaps because of the importance of gold historically & SA. So from a risk-adjusted basis, being only in SA isn’t a good idea, nor being only in any other single country.

What confuses the issue of returns horribly is currency movements. I feel that over a short timeframe of 5 years, your relative performance can disconnect completely just on the basis of what the USD/ZAR or EUR/USD has been doing. If you switch completely to US equities now, at 20+ PE and the USDZAR keeps going from the R16 all the way back to R10 or lower, there will be tears – just like there were when nobody took money out of SA and the USDZAR went from R7 to R14 in the space of the past 4-5 years.

Magnus, what are you doing to make SA a better place?????????
Are you, for example, making donations to charity??????? etc

Magnus, like most of us ordinary workers are paying an effective tax rate of around 50%. This tax is meant to make SA a better place but is actually a charitable donation because when last did you receive anything meaningful for your tax?

yes, absurdly high personal taxes ( blood money ) and squandered by an incompetent government whose leaders are living a luxurious live while their people must eat malamohodu and runaways.

No donations to charity! No handouts!
People must get off their backsides and WORK and learn and attract foreign investment with decent conduct not a begging bowl!

Look at South Korea-500% higher GDP per capital!! Not donations-work ethics, education, intelligence and innovation!!!

The Koreans have very high IQs and a culture that values/promotes hard work. We have the opposite here in good old SA.

I can’t talk for Magnus but I’m working extremely hard, try to be a person of integrity and in the process worrying myself to death about business cash flow, debt, crime…etc. oh and paying taxes.

Donations my friend,will not make a difference in a corrupt country.

Seriously?

MH’s company provides for at least 20-30 staff members, all of whom have children and spouses among them, and they are able to provide for their families.

My daughters friend was murdered in a hijacking a month ago, he also had investments offshore!!

I have also said many times to MH – GET yr family off shore – not just your money!

Regulation 28 is too restrictive and since it also applies to Living Annuities I suggest that, unless you have no other choice, take as much control of your own retirement savings and avoid regulation 28 restrictions. As an 81 year old pensioner I invested in a living annuity in 1999, before regulation 28 restrictions regarding the split between asset classes came into being. The only restriction which applied back then, and still applies to my investment,is the that you draw between 2.5% and 20% from your fund.

It does not apply to living annuities.

Correct, they do not. In fact Magnus states so in the article even haha, to quote:

“I often meet investors over the age of 55 who have substantial amounts of money locked up in badly performing pension/provident/preservation and retirement annuity funds. In most cases they have not been advised to consider alternatives to move funds from such restricted portfolios to unrestricted portfolios such as a living annuity or even a full withdrawal”

I beg to differ. I have a living annuity with Allan Gray and it definitely applies. Call them to confirm.

See reply to supersunbird.

I don’t know who you spoke to at Allan Gray, but you’re WRONG. There are no Reg28 restrictions applied to Living Annuities. In fact Reg28 applies ONLY to Retirement Funds and a Living Annuity is considered to be a Life product. I suggest you call them again.

Reg 28 does not apply to living annuities. Invest via Allan Gray Orbis Global Feeder Fund or the Old Mutual global Equity fund 100%.

And the 2.5% to 20% rule should be changed to 1% ~ 15% to accommodate every one. The 2.5% has to be lowered.

“Capital flows to where it is made to feel welcome” – Indeed

Meneer Magnus put your money and your ideas where your mouth is and start an investment fund . But please do not do a Jack Milne on us. LOL

yes please! US technology and bio technology funds.

Just go onto NYSE & Nasdeq & BUY – why do you need a managed fund?

Magnus is an advisor not a fund manager. Do you understand the difference?

Magnus has his own funds (SA registered unit trusts)… 3 funds of which the 2 bigger ones are Reg 28 compliant funds. I guess it’s good to have your bread buttered on both sides…

“Where can I find the Cumulative return for the JSE for periods 1975 to 1985 and 1985 to 1995 and then 1995 to 2005 (Madiba era)?”

Heystek’s harping on the past with his selective memory and virtue signalling is galling.

His assertion that exchange controls “also, over time, tends to impoverish people and investors” is riddled with logical fallacies, e.g. fallacy of the single cause and an appeal to emotion (The Nats was evil). In other words if one disagree with him one must also be evil like the despicable Nats. I intensely dislike sales people that deliberately mislead people by employing logical fallacies to promote their views and products.

If Heystek is correct nobody would have invested in South Africa.

However, all indications are that the future will be nothing like the past. Maybe the following Citizen link will help-

“The next 100 years on the JSE won’t be like the last 100”

http://citizen.co.za/business/1455585/next-100-years-jse-wont-like-last-100/

And so it is once again proofed. As I have mentioned in my comment on the previous article of the writer, some of those that regularly comment on columns just can’t help themselves – their replies must be terribly negative and they must attack the writer even though the miss the actual point of the article. It’s an old South African problem.
If you can read (and actually understand what you are reading) one can acquire a wealth of wisdom. Value adding comments though are priceless.

How about a returns comparison excluding Naspers? That will make for some frightening reading!!

It is time people faced up to the real consequences of bad government. Too man people feel that what happens in parliament is a side show affecting the poor only.

Somebody called me!!! No I have no issues with this – unlike MH I get no commission from these comments – just trying to do my bit for the olde country! I have said ad naseum that your entire RA in dusty us based on treasury & ins co’s taking as much as possible from yr pensions. I have also said get yr money off shorevunto YOUR account. And sorry aus has enough japies – those lawyers u sent over was more than anyone cld handle!

It is not just JSE, we are getting poorer by a minute. I just did interesting calculation. When we arrived to SA in 1972 while openning bank account i noticed a sign ” Buy a Krugerrand for R45″, we didnt know any better and didnt buy. But now I calculated what percentage of my salary ( R480 gross at that time) will I need to buy 1 krugerrand- it came to 9,375%. NOW calculate for yourself what kind of salary u will need today to buy a krugerand with only 9,375% of a salary.With current price around R17000 u will need a stagerring salary of R 181333/month to buy a krugerrand ! So what about this empoverishment of SA middle class ?

Well the price of gold is unusually high at the moment so the impoverishment is not as bad as it seems from that one comparison.

But I certainly think that most of what passes for “middle class” in SA would not meet that standard in the first world. Certainly a large (if not majority) chunk of the UK working class would be considered middle class in SA.

A veneer of keeping up comes from a weak currency, VERY cheap housing and services/restaurants/wine by world standards. But as soon as you convert to dollars, buy luxury imports or go abroad, suddenly everything seems expensive and one feels poor.

An informative article. I would have also liked to see a table of the local index against its direct – by country – major market and emerging market peers (obviously just a sample number of countries). I suspect that table might reveal more to inform where to go if you’re going offshore in terms of overvalued markets. The only seemingly close direct peer I see in the tables is the S&P 500.

Yarwell no fine –

Exchange control was only abolished in 1979 by the Thatcher Regime, as Exchange control prohibited the British residents, both individuals and corporate bodies, from holding foreign currencies.
The regulation’s purpose was to help the authorities conserve the gold and foreign currency reserves and maintain the UK’s balance of payment positions. Before 1979, the Exchange Control Act of 1947 had tightly regulated capital transactions (both direct and portfolio investment) of British residents with foreign territories.
British banks and merchants were also prevented from lending sterling to non-residents to reduce its international role.
….and along came ‘’Globalization’’ ……I think the beginning of the end with a plethora of new rules, regulations, dual- and offshore listings ….and the birth of the now very contentious ‘’white monopoly capital’’
The Cons of Globalization
Not Good for the Underdogs, Makes the rich, richer, Labour drain and a loss of cultures….
Well, ZAR 350 billion left the rainbow nation during the last 18 months, but the USD/ZAR is still at around 13, where it was 18 months ago….if this is true, and I think it is, why did the USD/ZAR not weaken substantially…
We are living in a third world country, with the best ‘’constitution’’ in the world, for now. This could be changed or removed with a 2/3 majority (ANC and EFF coalition?). Everything will then be nationalised etc and all our clever funny arguments pertaining to investments will come to zero!

Heck guys, I must thank many of you for a good laugh. Maggie is right – the comments are indeed better than his (good) articles.

But seriously, I was a referee once, France gets the award for best comment.

“Regulation 28 is a direct consequence of capital controls, which were imposed on South African investors by the apartheid government in 1960” Quite a few unique laws and regulations left from the apartheid government it seems. Another particular irritating one is the removal of “ring-fencing” from the fuel levy which would have avoided the need for e-tolls as I understand. So that would imply that some restrictive laws from the apartheid era were not all bad according to our current government? Maybe if Helen Zille pointed that out they would be immediately be removed and citizens would benefit? How about it madam – in for a penny in for a pound (or to be PC a cent for a rand0?

I don’t always agree with Magnus, but with regards to Reg28 I believe he is 100% correct. Irrespective of how you view this regulation, consider the FSB’s rationale behind it. They claim that Reg28 will help protect your hard-earned capital against over-aggressive investments leading-up to retirement – it seems that they don’t consider any specific portfolios when clamping-down on offshore investments as they’re ALL deemed to be Aggressive. Well, I have yet to hear any explanation from them why they allow PENSIONERS to invest their hard-earned capital AFTER retirement ANYWHERE – without any consideration for the so-called protection offered by restricting Offshore investments to 25%.

Surely it would make sense to argue that Reg28 would be more important to help protect your capital AFTER retirement than before? Once you’ve retired and drawing a pension against your capital, you have virtually no options to recover from losses that you might suffer from investing offshore.

Ironically, the same can be said for the 25% restriction on Property within Reg28. Property has consistently out-performed most other asset classes over more than the last decade – and isn’t long-term investing what saving for Retirement is all about?

With regards to the FSB. . . You can only fool SOME of the people ALL of the time. . .

I’m going to repeat again, you don’t have to be in a Reg28 fund, you are either in it for your own free will (for a tax benefit and whatever), or because you didn’t know better (at least people might now learn about it, so thanks to Magnus for that) or your employer forces you, which is an issue between you and employer (not FSB or Treasury, which is the actual source of Reg28 I think).

If you don’t want the tax benefit (and other benefits) then don’t invest there, you can put your money wherever your heart desires for your retirement, you don’t have to listen or pay mind to their stupid Reg28 rules then.

But personally, I would love it if Reg28 allowed 50% overseas allocation.

Same data in Rand – very different outcome from the info in the article!!!!

From: 14 07 2012 To: 14 07 2017

Name: Performance
MSCI AC Asia Ex Japan 41,80%
MSCI Europe 51,68%
MSCI Emerging Markets USD (Net) 27,46%
MSCI AC World 65,73%
FTSE/JSE Africa All Share 84,07%
S&P 500 Total Return 101,64%

There is plenty of money to be made on JSE listed stocks with globally diverse income streams. There are even ETF’s that track global markets. Stop hugging the benchmark! Start doing some research and find the jewels. They are out there. Also, forget reg 28 funds- You will never grow rich with them. Forget endowments too – they are prohibitively expensive. Get stuck into markets yourself, keep your costs to a minimum and build yourself diversified streams of income. Also keep some powder dry, there are opportunities in every recession for those who have cash.

Load All 77 Comments
No more Comments, leave a reply.

LATEST CURRENCIES  

ZAR / USD
ZAR / GBP
ZAR / Euro

Podcasts

GO TO SHOP CART

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2