Rich South Africans are increasingly moving their money offshore to protect their wealth from the country’s unstable macroeconomic conditions.
Concerns about rising inflation, political uncertainty, a weakening rand, and fragile infrastructure are prompting investors to rethink traditional investment approaches and seek alternative opportunities outside South Africa, Business Tech reported.
Experts from Westbrooke Alternative Asset Management, a multi-asset, multi-strategy manager and advisor on alternative investment funds and co-investment platforms, confirm this growing trend.
The shift is especially clear in the rising demand for alternative asset classes like hybrid capital investments, which are now preferred over conventional listed markets.
In partnership with Rand Merchant Bank (RMB), Westbrooke recently launched the Westbrooke Dynamic Opportunities (WDO) UK Fund, which has already raised £155 million (R3.8 billion) for investments in hybrid capital deals across the UK’s lower-middle market.
This fund’s success reflects a wider pattern among South African ultra-high-net-worth individuals and families, who are increasingly seeking hard currency returns that offer lower risk and better diversification.
“The traditional 60/40 portfolio allocation, 60% equities and 40% bonds, is simply not fit for purpose anymore,” said Dino Zuccollo, Head of Investor Solutions at Westbrooke.
He explained that when global inflation rises above 2.5%, stocks and bonds tend to move in the same direction, reducing the benefits of diversification.
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South African investors have faced years of market turbulence caused by factors such as the pandemic, international conflicts, trade disruptions, and persistent domestic instability.
These challenges have driven many to look abroad for assets less exposed to local risks and currency depreciation, while still providing attractive returns.
Zuccollo added, “It isn’t portfolio theory alone which has driven the recent adoption of alternatives.
By investing in companies in the lower and middle market segments, we can exploit capital market inefficiencies and generate greater returns without taking on excessive risk.
This is especially appealing in established, hard currency jurisdictions like the UK.”
Westbrooke’s expansion into the UK market has been notably successful.
Since launching there in 2017, the firm has facilitated about £750 million in deal value.
Its first UK Dynamic Opportunities Fund, launched in late 2022, delivered an 8% cash dividend and a 15% annual return, already returning over 35% of committed capital to investors.
The hybrid capital strategy offers investors contractual, interest-linked yields, providing an inflation hedge, lower volatility compared to public markets, and exposure to growth potential in UK businesses.
“The compelling side of this approach is that you’re well protected on the downside, despite the potential for higher returns,” Zuccollo said.
He also pointed out that South African investors have traditionally lagged behind their global peers in adopting alternative investments, but this is changing as knowledge and understanding improve.
“Westbrooke has worked hard to make access to these investments easier,” he noted.
This offshore diversification trend is mirrored in major South African companies.
Invicta Holdings, chaired by billionaire Christo Wiese, recently announced plans to generate 50% of its earnings outside South Africa within two years.
Invicta cited ongoing challenges such as load shedding, worsening infrastructure, and regulatory inefficiencies as key reasons for pursuing more stable international revenue streams.
“Geographic diversification and the pursuit of sustainable earnings remain core pillars of our long-term strategy,” Wiese stated.
Economists are also emphasizing the importance of diversified investment approaches.
Dawie Roodt, chief economist at the Efficient Group, warned that concentrating all assets in South Africa is risky given the current economic environment.
While acknowledging opportunities on the Johannesburg Stock Exchange (JSE), he advised focusing on highly liquid stocks that can be quickly sold if necessary.
Roodt recommended investing in rand hedge stocks, South African-listed companies that earn a significant portion of their revenue in foreign currencies.
Examples include global giants such as Naspers, Prosus, Richemont, Anglo American, AB InBev, BHP Group, and Glencore.
He also suggested investing in precious metals like gold, silver, and platinum to protect against rand depreciation and preserve wealth.
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Image Credit: Business Tech
