The introduction of the Sygnia Life Berkshire Hathaway Fund has made investing in Warren Buffett’s $500 billion public company more accessible to the ordinary South African investor than ever before.
The introduction of the Sygnia Life Berkshire Hathaway Fund has made investing in Warren Buffett’s $500 billion public company more accessible to the ordinary South African investor than ever before. Sygnia’s Head of Asset Allocation, Kyle Hulett, explains why this is a major move for savvy investors.
South Africans are already able to invest in Warren's Berkshire Hathaway (BRK) via direct offshore investing using their own foreign exchange allowance. So what makes investing in the financial giant’s high-performing stock via the new Sygnia Berkshire Hathaway Fund (SLBF) different or, dare we say, better? Plenty…
For starters, the SLBF was created for investors who are not set up to invest directly in the offshore market. Rather, the structure of the SLBF enables other investors an affordable, accessible and low-cost option to invest offshore with Buffett.
The SLBF is a linked Life Endowment Policy that invests 100% in BRK shares. Investment in SLBF starts from as little as R5,000 per month. Investors own units in the SLBF, which in turn is 100% invested in BRK shares, so when Buffett performs, so does your investment. And that performance has historically been outstanding. In the latest annual letter to shareholders, Buffett summarised returns since 1965 at a whopping 20.5% for BRK – that’s more than double the S&P500s’ 9.7%.
The structure of the SLBF offers a range of other benefits to South African investors:
Low entry cost
By pooling investments to buy into BRK, Sygnia is also able to negotiate good currency and stockbroking rates, which drive down the transactional costs. And less transactional costs equal more returns.
In addition, there are tax benefits to owning units versus buying shares independently in the open market.
As for Sygnia’s management fee, as always we’re keeping it low: 0.40%. Aside from a few minor additional costs, such as bank fees, the management fee is all-inclusive. Comparatively, if you had to DIY, your costs could very high, depending on the bank forex charge on small amounts as well as minimum brokerage levels. And that’s before you start adding on platform costs, tax opinions and offshore bank charges.
Ease of access
I’m going to reiterate that the SLBF is not aimed at major offshore players who are already set up to trade independently and can easily buy BRK’s Class A or B shares. Rather, the SLBF has been designed to offer a hassle-free option to invest offshore with Buffett without the complexity. Because trading offshore really can be complex – it entails exchange control clearance, dealing with a bank to convert your currency, having an offshore bank account, an offshore broker and an excellent knowledge of offshore trading.
The SLBF eliminates all these barriers to entry for ordinary South African investors, and provides full currency exposure with all the benefits of investing offshore in a high performing fund.