Coronation has increased its offshore holdings across various funds, including its Strategic Income Fund, in the belief that global equities will be the best-performing asset class over the next 10 years for rand-based investors.
This is a fairly strong statement given that South African investors have had little to no return from global equities since 2000. A combination of a stronger rand and a very volatile, lacklustre performance from global equities, even in their base currencies, has meant that South African investors have seen far better performance from their local investments.
Apart from the view that we will see a significantly weaker rand (especially given the rhetoric around intervention to weaken the currency), Rudolf Schmidt, MD of SEI Investments, says that improved regulation of the financial industry globally will prevent the boom/bust cycle that dominated the global equity markets over the last 10 years. This should result in less volatility and a return to the longer-term trend of delivering about 5% above inflation.
While there is certainly an argument for global equities, we are still in a very uncertain time and many developed global economies are facing considerable risks such as high sovereign debt levels. While global equities should form part of any long-term portfolio, investors need to understand that this is definitely a longer-term view rather than a short-term fix.