By Braam Bredenkamp, Financial Advisor, GraySwan

The recent announcement of South Africa’s grey listing has compounded an already volatile market and has introduced more administrative complexity when investing offshore. Onerous due diligence processes and verifiable information may be required creating delays with offshore investments.

Notwithstanding the risks, optimally constructed offshore structured products are an appealing investment option as they reduce the risk of market timing and can provide partial or full capital protection, allowing investors to obtain exposure to equities and commodities in a risk-controlled manner. Structured products are pre-packaged fixed-term investments that provide private investors with easy access to offshore equity and commodity markets, with a pre-defined risk and return profile over a pre-defined investment period.

The tax implications for this product may vary depending on the term of the investment, with capital gains tax applying unless the investor surrenders early, in which case it may be taxed as income. Structured products can be invested through vehicles such as sinking funds or endowments, which provide tax and estate duty benefits.
Any well-balanced and diversified investment portfolio can be curated with structured products. During uncertain times capital protection of any kind is a sought-after benefit. This, coupled with the possibility of an enhanced investment return, is an attractive combination.

A robust research process of various structured product options that complement clients’ traditional offshore equity and commodity investment portfolio holdings is needed to proactively and continuously offer structured products for clients.
GraySwan has an established partnership with a Swiss-based platform with an investment grade credit rating that three levels higher than South Africa's top-rated banks. This affords them the flexibility to select any level of capital protection, along with a guaranteed or non-guaranteed investment return, linked to a specific underlying offshore asset. With the use of a world-class offshore trading platform the GraySwan team provides access to bespoke structured products that are tailored to the specific needs of their clients. The range of underlying assets to these product options available is extensive and includes various indices, instruments (i.e. Exchange Traded Funds and Actively Managed Funds), single stocks, or a combination of all.

Any investment does bring with it potential risks such as counterparty, credit and liquidity risks. Additionally, structured products do not pay dividends.