investing offshore from South Africa
Traditionally, for most South African investors, investing directly offshore has been a complex, lengthy and expensive process and often only available to the very wealthy.
In times of ever increasing economic uncertainty, emerging market currency volatility (including for the Rand) and reversal of Regulation 28 pension rules it’s never been more important for South African investors to have simple, direct access to offshore markets for their long term investments without layers of expensive charges and bureaucratic processes.
In conjunction with Mercury FX Omba have developed a simple and secure online process for South African individual investors to save offshore into a globally diversified, low cost, medium to long term savings solution which aims to beat USD inflation by 3% over the investment cycle. The Omba Moderate Risk Global Allocation Fund is domiciled in Ireland and is regulated under the well-regulated UCITS framework. Investors gain access to over 2000 global equities and 5000 bonds in 35+ countries in a single solution.
the Omba and Mercury FX solution
The simple, secure online process allows you to:
- Convert ZAR into USD/ GBP/ EUR at more competitive FX rates than most big banks.
- Send the money offshore into an investment which you hold in your own name (not in nominee form).
- Invest with no upfront costs and no redemption fees to get your investment back. No lock ups on your money. Redeem whenever you want, with daily redemptions.
- You can invest with as little at USD10,000.
- Top up easily.
- Have all SARB approvals handled in the process.
The process is secure and all entities involved are regulated by the Financial Conduct Authority (UK), the Central Bank of Ireland (IE) or the Financial Sector Conduct Authority (RSA).
There is no custody charge to hold units in the Fund and FX rates on externalisation are highly competitive.
You are buying direct units in an offshore fund, not via a SA feeder fund or asset swap.
One online application with intelligent document uploads to open all your accounts.
invest from South Africa with ease
Mercury FX, Mercantile Bank and Prescient
Through a simple online onboarding process you will have a Mercury FX Account, a Mercantile Bank account which can hold foreign currency and your Prescient account in Ireland .
Deposit ZAR and do FX trade to USD, GBP, EUR
Once onboarded you wire ZAR into your Mercantile Account and then convert ZAR (via Mercury FX) to USD, GBP or EUR at highly competitive FX rates. All SARB approvals handled by Mercantile and Mercury FX.
Send USD, GBP, EUR to Prescient client money accounts
During the onboarding process you would have selected into which of the OMBA share classes you wish to invest. The converted USD, GBP or EUR is paid to Citibank for onward investment into the Fund (via Mercury FX platform).
Funds invested in OMBA Moderate Risk Global Fund
Once the USD, GBP or EUR have arrived in the Prescient account you will invest on the next available dealing day at the NAV of the Fund. The Fund deals on a Irish business daily basis.
credible & regulated partners
The solution uses credible regulated service providers to ensure transparency and security.
frequently asked questions
These FAQs are particularly focused on questions regarding this single FX and Fund custody solution.
As your funds will be invested in the Omba Moderate Risk Global Allocation Fund please also see these separate comprehensive FAQs for more information on the fund, its structure and our investment philosophy.
What are my offshore Rand allowances?
Mercury International offers international money transfers for both individuals and businesses alike, at bank-beating rates, zero fees and are on hand to give you an excellent and personalised service. No need to wait in queues. They deal with the banks for you.
How much can I transfer?
In some cases a tax clearance certificate from the South African Reserve Bank (SARB) will be required depending on how much you intend to transfer overseas in a calendar year and whether or not you live in South Africa.
You can transfer a total of R11 million per calendar year:
- R1 million individual discretionary allowance (no tax clearance required)
- R10 million foreign investment allowance (tax clearance is required from SARS)
Only tax-payers over the age of 18 who are South African residents are eligible for this allowance. It is mandatory to have a tax clearance certificate that is valid for 12 months to take advantage of the R10 million allowance.
Mercury International will assist you in obtaining SARS tax clearances as and when you require them.
If you are looking to exceed the amounts above, you will need to apply to the SARB for a special dispensation. These applications can be complex, but our team can guide you through the process.
How does the South African Revenue Service and SA Reserve Bank process work?
Individual Discretionary Allowance of up to R1 million per calendar year
This allowance can be used for any legal purposes overseas and includes any travel expenses abroad billed from South Africa in a foreign currency (e.g. credit card use while travelling overseas). No foreign tax clearance required.
Individual Foreign Capital/Investment Allowance of up to R10 million per calendar year
A Foreign Tax Clearance Certificate (FTCC) must be obtained from SARS for transfers under the FCA/FIA. FTCCs for amounts up to R10 million per calendar year can be applied for with SARS and once issued, the certificate is valid for 12 months.
SARB Special Approval Applications
In order to move more than R10 million, one must apply for a letter of compliance from SARS. Once this letter is received, an application must be made to the SARB for special approval to be granted before being able to move the amount(s) that exceed(s) the annual allowance. There is no restriction on the number of applications that can be made or on the size of the approval needed (no exit levies or penalties are payable).
This is currently set at R20 million per family unit.
Mercury FX can assist with Non-Resident Accounts and any exchange control applications for our clients who live outside of South Africa.
More information can be found here on the SARB website.
What exchange rate is used?
After your account is approved the process for booking a trade is:
- Deposit the estimated Rand amount of your OMBA fund subscription into the Mercantile Bank account;
- Email or call the Mercury FX team for a quote which you can choose to either accept or decline;
- Once the FX trade has settled (trade date + 2 days for spot trades) at the agreed rate, the foreign currency will be sent directly to the Prescient offshore client money account and then further invested into the fund.
It is possible for smaller subscription amounts (below USD, EUR or GBP 20,000) to agree the FX rate with Mercury FX in advance of making the Rand payment into the Mercantile Bank Account. To ensure a swift transfer and no settlement or trade issues we suggest depositing the funds in your MFX Mercantile Account in advance of booking your FX rate.
Once received your foreign currency funds will be invested into the Omba Moderate Risk Global Allocation Fund and into the share class you selected at the time of your application.
What are the dealing deadlines?
Foreign Currency (FX) trades can be done with Mercury FX between the hours of 08:30 – 17:00 South Africa time.
The cut-off time for making same day transfers/ payments of foreign currency is 11:00 South Africa time.
Can I hold cash in foreign currencies?
Mercury FX can provide for scenarios where clients wish to take advantage of favourable exchange rates but may not be ready to invest offshore and deploy their funds. Mercury FX can set clients up with a Foreign Currency Account (FCA) with Mercantile Bank. This account can be set up for all major currencies in a couple of hours without any further documentation requirements. The converted funds can remain in the FCA account until such time as the client is ready to move the funds offshore.
It must however be noted that due to low global interest rates no interest is earned on the FCA account so it should generally not be used as a long term savings product.
All the exchange control reporting would be handled on the initial transaction so although the funds are invested locally in a South African FCA account, from a reporting perspective they are deemed to be offshore already and one can then move the funds on to the foreign beneficiary account(s) through a simple transfer instruction. There will be a small transfer fee of R250 deducted from the funds to facilitate the transfer but apart from that there are no further fees.
What if I already have foreign currency offshore
Should you already have foreign currency funds in an offshore account then depending on the amount you could still invest directly into the Omba fund. Or if you intend to transfer more Rands offshore and top up a direct fund investment then you could complete the Mercury online application.
- >£$€100,000 as a one off investment; you could invest directly into the Omba fund by completing the Application form. This would not open a Mercury or Mercantile account for you and thus not enable further Rand transfers via this channel.
- >£$€10,000 as an initial investment and subsequent investment transfers from Rands; you can complete the Mercury Prescient signup process which will open you a Mercury FX, Mercantile and Prescient account. You can then transfer the lump sum directly from your existing offshore account to the Prescient client money account for the initial fund investment and then use your Mercury/Mercantile account to facilitate further Rand transfers to the fund as you require.
- >£$€10,000 < $€100,000 as a one off investment; we would recommend investing in the Omba fund via an offshore bank or a fund platform such as AJ Bell in the UK. The fund has already been listed with a number of overseas global banks so all you need to do is ask your offshore bank to make the investment on your behalf (like you would for any other fund you hold in an offshore bank account).
Can I just use the FX service?
Yes, if you just want to use Mercury FX to move money into and out of South Africa then you can just signup using the standard Mercury FX process for a Personal or Business account.
This will open you a Mercury FX and Mercantile Bank account for you. You will need to specify the external bank for your foreign currency transfer(s). This process will not open you a Prescient account for you or invest directly into the Omba fund.
Why a Moderate Risk Strategy?
South African investors will very often have large concentration risk in Rand based assets such as their property, business or pension savings. Therefore, as pertains to many savers’ offshore investments we’ve found a more moderate risk strategy is most appropriate consisting of a mix of high quality bonds, higher yielding bonds and globally diversified equities. Generally speaking, when global equities are falling the Rand is weakening and the SA stock market falling. i.e. in a “risk off” environment of this nature we’ve found most clients like to see some stability from the bonds we hold in the fund.
Every investors’ circumstances are different however so this does not constitute financial advice and you should speak to an Independent Financial Adviser to assess your personal situation.
The investment objective of the Fund is to achieve capital appreciation over the medium to long term. The Fund aims to achieve this objective through investing (primarily through collective investment schemes structured as exchange traded funds) in a GLOBAL and DIVERSIFIED portfolio of equity and fixed income securities allocated across regions, countries and sectors. The Fund is actively managed in reference to a benchmark of Consumer Price Index (“US CPI”) plus 3% per annum and measures its performance against this benchmark.
The Fund aims to be invested in a moderate risk portfolio of equity and fixed income securities where the risk profile could be considered comparable to a 50% global fixed income / 50% global equity allocation.
What is Passive investing and what are ETFs?
What is the Funds performance?
Please see the latest MDD and Key Documents for details.
How can I view my investment balance and redeem?
Once invested you can register an account on the Prescient portal to view your USD/GBP/EUR invested balance.
After you have completed the application process and received your welcome email from Mercury FX and Prescient, on the Prescient Portal click on “Register as a new user” and then select the product as “Umbrella fund” and enter the Prescient Investor Reference you would have received along with your personal details to register.
Is the process secure?
All forms are secured by industry standard Secure Socket Layer (SSL) certificates and information is encrypted in transit as are the secure servers.
Please see the Mercury FX website for more details.
What are the charges?
There are no upfront charges to invest.
There are no performance or redemption fees.
Mercury FX earn their fees within the competitive FX rate at which you convert.
The fund has a Total Expense Ratio capped at 0.8% which includes ALL layers of fees (i.e. including custody, administration, product costs, manager fees, execution costs, legal, audit etc.)
How long does the application process take?
The onboarding process uses leading document verification processes to review the documentation provided.
The standard SLA for account opening is 2 working days each of the Mercury FX and Prescient teams from receipt of satisfactory documentation but should all Verification and Proof of Address documentation be in order and not require either the Mercury or Prescient onboarding teams to request more information or documentation then the accounts could be open in up to 2 working days.
The FX transaction is done at your discretion once you’ve agreed a rate with Mercury FX.
Thereafter once the USD, GBP or EUR has arrived in the Prescient account you will invest into the Omba Moderate Risk Global Allocation Fund on the next available dealing day at the relevant daily Net Asset Value (NAV).
Funds need to be in Ireland by Tuesday for investment at the Wednesday NAV as the fund currently has weekly dealing but is reviewing moving to daily dealing later in 2020.
How do I track my application?
After you complete the application form you will receive an email from Mercury FX informing you of your application.
There will be a link in this email that will show you the application’s progress and this will be updated as it moves through the various approval processes right up until the funds are invested.
the traditional challenges
Traditionally investing money offshore was complex, bureaucratic and expensive with some of the constraints being:
The first hurdle was the externalisation of your South African Rands which typically required you to have an offshore account into which to send the proceeds from your currency conversion. However, the opening of an offshore bank account was (and most often is) a complex and cumbersome process frequently requiring very high cash minimums (>£$50k) unless you live or travel abroad.
Secondly once the ZAR had been moved offshore, often incurring expensive fees and poor rates from the major banks, the next issue was how to actually buy units in a particular fund as a South African investor. Most of the larger UK and European fund platforms don’t allow SA own name investors to open accounts due to perceived Anti Money Laundering risks and Know Your Client verification complications. Thus, unless an investor had access to a Wealth Manager custody account, also usually targeted at High Net Worth Investors, investing in offshore funds was quite cumbersome.
All of this meant true offshore investments into developed country currencies and asset classes was beyond the reach of most individual savers. To gain offshore exposure South Africans have historically bought Rand Hedge Stocks which were often dual listed, invested in expensive mutual funds (unit trusts) which aimed to provide both some offshore and domestic exposure or other ZAR denominated Feeder Funds which then invested into the offshore funds. In all these scenarios your investments actually remain in SA and are not physically externalised. Location of one’s assets when diversifying is also an important consideration, particularly if governments change exchange control rules.
simple. secure. offshore.
can you afford not to?
The investments of the Fund are subject to market fluctuations and the risks inherent in all investments and there can be no assurance that an investment will retain its value or that appreciation will occur. Changes in exchange rates may have an adverse effect on the value, price and/or income of the product. Independent financial advice should be sought as not all investments are suitable for all investors. Where foreign securities are included in a portfolio there may be potential constraints on liquidity and the repatriation of funds, macroeconomic risks, political risks, foreign exchange risks, tax risks, settlement risks; and potential limitations on the availability of market information. The investor acknowledges the inherent risk associated with the selected investments and that there are no guarantees.
The price of shares and the income from shares can go down as well as up and investors may not realize the value of their initial investment. Past performance may not be a reliable guide to future performance. Prospective investors should consult a stockbroker, bank manager, solicitor, accountant, financial adviser or their professional advisers accordingly. Prices are published daily and are available on the Prescient website.
Collective Investment Schemes in Securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CIS’s are traded at the ruling price and can engage in scrip lending and borrowing. The collective investment scheme may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. A schedule of fees, charges and maximum commissions is available on request from the Manager. There is no guarantee in respect of capital or returns in a portfolio. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate.
Performance has been calculated using net NAV to NAV numbers with income reinvested. CIS prices are calculated on a net asset basis, which is the total value of all the assets in the portfolio including any income accruals and less any permissible deductions (brokerage, STT, VAT, auditor’s fees, bank charges, trustee and custodian fees and the annual management fee) from the portfolio divided by the number of participatory interests (units) in issue. Forward pricing is used. The Fund invests in other Collective Investment Schemes that levy their own charges, which could result in a higher fee structure. For any additional information such as fund prices, brochures and application forms, please go to www.ombafunds.com. The MDD is also available on request from the Manager.