Presented by Discovery
Industry News

Discovery’s Dollar Capital 200+ gives SA investors unique global growth potential

Craig Sher, Head of Research and Development at Discovery Invest, suggests that well designed structured products offering attractive payoffs should be a part of every investment portfolio.

Especially in South Africa’s challenging exchange rate environment, US$-based structured products can provide an exceedingly attractive rand hedge.

Discovery Invest recently launched the Discovery Dollar Capital 200+, their highest paying US$-denominated structured product to date. The product provides investors access to a global share portfolio of high-quality US, European, Asian and Australian companies.

If the value of this share portfolio is flat or positive at the end of the five-year period, the structured product provides investors with a staggering 100% return in US dollars before the effect of admin and adviser fees and tax.

The product also provides some downside protection, giving investors their initial capital back in US dollars unless the global share portfolio falls by more than 30% during the five-year term. Investors also participate in any upside if the global share portfolio goes up by more than 100% over the period.

To date, Discovery has built more than 20 rand-denominated and five US$-based structured products. All provide access to global markets, with a degree of capital protection if markets underperform. Of the seven local Discovery Capital 200+ products that have already matured, six delivered 100% return over five years.

Only one – maturing during the height of Covid – didn’t deliver a 100% return, instead providing clients with capital protection, returning their investment proceeds. All 13 of the local structured products that have not yet matured are in line to provide clients with 100% return as of 31 May 2024.  

People generally consider that investing offshore is only for high-net-worth individuals, or astute and experienced investors. Sher notes that this should not be the case.

“We have seen that between 50 to 60% of the costs of everyday items bought in South Africa are influenced by the rand/US$ exchange rate. With this in mind, “investing offshore – in US$ – to diversify risk and act as a rand hedge is a compelling proposition for South Africans” says Sher.

While the minimum investment threshold for the Discovery Dollar Capital 200+ is US$ 10’000 there is no upper limit. South Africans can either draw on their R1 million annual discretionary allowance or, should they want to invest more, apply for a tax clearance allowance of up to R10 million a year.

The product is available on the Discovery Global Endowment and so capital gains tax of 12% will apply on any investment gain in addition to adviser and administration fees. Discovery has also added a currency enhancer, “allowing investors to invest below the prevailing exchange rate,” adds Sher.  

Structured products can play an important role in a well-balanced portfolio. “Our latest US$-based product is especially relevant in today’s volatile markets, providing a great rand hedge as well as a payoff different to what traditional markets can offer,” concludes Sher.

Click here to invest in the Discovery Dollar Capital 200+.


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