South African investors - large and small - are to be given direct access to foreign investments on the back of the Reserve Bank's permission to life assurance giant, Old Mutual, to negotiate almost R4 billion in foreign asset swaps.
Old Mutual is to launch two foreign investment portfolios on April 1. This will allow local investors to either make monthly investments, from as little as R75 a month or lump sum investments from R15 000, through endowment policies, retirement annuities or deferred compensation plans.
A major criticism since the easing of exchange controls to allow institutions to make share swaps has been that only the wealthy have been able to participate, and then only on a limited scale.
Dave Hudson, Old Mutual assistant general manager: marketing, said in an interview that for the first time in nearly 60 years ordinary South Africans would have the opportunity to invest abroad.
"Effectively South African investors will now be able to spread their risk internationally, have a proper hedge against a fall in the value of the rand, and be able to invest in some of the best performing companies in the world."
The South African shares which Old Mutual has been allowed to sell for foreign currency or swap for international shares amount to about three percent of total assets managed by Old Mutual.
Hudson said the pace at which the asset swaps took place would depend on the demand for the new products and on the deals that could be arranged with foreign investors to take up the South African shares.
"We will not sell or swap shares in poor deals."
Investors will basically be given the opportunity to buy units in two portfolios. The two portfolios are:
* World Wide Equity Fund, which will have at least 90 percent of its assets invested in shares, making it essentially fully invested; and
* The World Wide Balanced Fund, which is for the more cautious investor. The portfolio will have a maximum limit of 80 percent in shares with the rest held in cash or bonds.
Property is being excluded at this stage.
With the two innovative products investors are also being given an escape route to swap back into a local Old Mutual portfolio if they become concerned about their investments offshore.
At a cost of one percent of capital - with a minimum charge of R100 and a maximum of R500 - investors will be able to swap between the two foreign portfolios and the life assurer's local Stable Fund, which is invested in cash and short-term bonds.
The charge is the same levied for switching by a unit trust management company.
The foreign investments will be managed by Dr Kevin Carter, head of Old Mutual International Asset Management, from its headquarters at Hook, south-west of London.
The two portfolios will be managed in dollars but South African investors will buy units in the portfolios and receive their benefits in rands. Charges will be the same as those levied on domestic products.