The Smart International Income Portfolio

A simple, low-cost investment for conservative investors looking to achieve hard currency returns in excess of bank deposits in either US Dollars or Sterling. The portfolio can be accessed via the International Investment Mandate.

Two discretionary portfolio options are available. Both options invest in a carefully selected portfolio of accumulating ETFs and funds to gain tax-efficient exposure to interest-bearing assets such as cash, corporate debt and bonds. The portfolios are managed to provide a high level of capital stability.

In our recent article we discuss why the SIIP portfolios are well placed to provide investors attractive hard currency yields in a highly cost and tax efficient way for the foreseeable future.

Benefits and Features Summary

High Income Yields
First World interest rates at multi-decade highs.
Tax-Efficient
Less tax. No situs tax.*
Low Cost
Two fee levels depending on investment amount.
Less Risk
High quality, liquid investments.
Active Asset Management
Portfolios managed by experienced investment professionals.
Asset Swap – no additional cost
For individuals, trusts and companies.*
Multi-jurisdictional Tax Reporting
Select your own tax year dates.
Efficient Estate Planning – no probate
Death Bed Donation* and joint accounts.
*South African Investors
Smart Dollar and Smart Sterling Portfolios

The Smart International Income portfolios are invested in investment grade, interest-bearing instruments to provide an attractive yield in hard currency with less capital risk.

  Smart Dollar Portfolio   Smart Sterling Portfolio
Approximate Gross Yield* ±5.6%   ±5.2%
Average Credit Rating A   AA
Interest Rate Sensitivity 1.0   1.0
*Yield to maturity, before investment management fee and custody fee. Model Portfolios, as at 18/03/2024

Asset Allocation


Dollar Portfolio
Sterling Portfolio
Fixed Rate Investment Grade Credit 53%
Floating Investment Grade Credit 47%
   
Fixed Rate Investment Grade Credit 13%
Government Bonds 13%
Money Market 74%
tick icon
tick icon
Model Portfolios, as at 31/12/2023

High Income Yields

First World interest rates are currently at multi-decade highs as evident in the chart below. As such, attractive hard currency returns are possible with significantly less risk.

Interest rates

Less Risk

We keep it simple. The portfolios will hold liquid, investment grade instruments with a relatively short average term to maturity. As such, the investment outcome is highly predictable.

Active Asset Management

Asset class exposures, credit quality and interest rate sensitivity are managed on a discretionary basis by FIM Capital Limited's team of investment professionals based on the Isle of Man with over 100 years of combined market experience.

Asset Swap

Where South African investors have reached their foreign investment allowance limit, they can utilise Marriott's asset swap capacity to invest into the Smart International Income Portfolio. This facility is also available to trusts and companies.

Estate Planning Features

The options of a death bed donation and/or joint account are available as estate planning features.

Death Bed Donation

A death bed donation takes effect on the day preceding the death of the investor and is the permissible mechanism for transferring ownership to surviving beneficiaries within South Africa.

As the investment is no longer owned by the original investor on the day of their death, the investment will not form part of an offshore estate for probate purposes.

From a South African tax perspective death bed donations are deemed to be dutiable property of the deceased estate* and therefore still attract estate duty. To avoid double taxation, however, they are excluded from donations tax**.

* in terms of Section 3(3)(b) of the South Africa Estate Duty Act ** in terms of section 56(1) of the South African Income Tax Act
Joint Account Holders

An investor may elect to open a joint account with another investor. In the event of the death of one joint holder, the whole of the portfolio will automatically vest in the joint surviving holder or holders. If a joint account investor elects an individual death bed donation, the donation has precedence, and the investor will be deemed to have donated their investment the day before their death. The investor's portion of the joint account will therefore be transferred to the listed beneficiaries effective the day before their death.

Joint accounts and death bed donations can be elected in the International Investment Mandate. Investors are encouraged to seek independent tax advice suitable to their personal circumstances.

Low Cost


Smart Dollar Portfolio   Smart Sterling Portfolio
$30,000 – $300,000 0.5%   £25,000 – £250,000 0.5%
›$300,000 0.38%   ›£250,000 0.38%

  • Minimum investment amount for new investors

Individuals: £25,000 / $30,000

Entities and Trusts: £100,000 / $125,000

  • Initial Fee

0%

  • Investment Management Fee

0.38% – 0.5% p.a.*

  • Custody Fee

0.1% p.a.*

  • Financial Advisor Initial Fee

Maximum 3%. Payments processed twice a month. Deducted from consideration received.

  • Financial Advisor Annual Advisor Fee

Maximum 1% p.a. Paid quarterly in arrears.*

  • Client Reporting

Biannual Valuations (28 February & 31 August)

Tax reporting available for multiple jurisdictions

  • Brokerage Fees and Other Duties

Charged by third parties when placing trades, will be passed on in full.

Brokerage fees will usually be charged at institutional rates as negotiated by FIM Capital Limited.

Brokerage fees, custody settlement fees and payment charges may be incurred for both the purchase and sale of underlying shares. Where possible, all such charges will be levied on a pro-rata basis.


*Deducted from capital quarterly.

Tax-Efficient for South African investors

Holding interest-bearing assets via accumulating ETFs* and funds is highly tax efficient as all income is automatically retained in the portfolios without incurring tax. The "roll-up" of income produces an increase in the value of the underlying funds and enables returns to compound tax free.

When capital is required, the investor can simply repurchase the required amount. Although a tax charge is triggered at this point, it will be subject to capital gains as opposed to income tax. The table below highlights the potential tax benefit for South African individual investors with different marginal tax rates.

Marginal Income Tax Rate CGT Rate (applicable on withdrawls) Benefit
45% 18% 27%
40% 16% 24%
35% 14% 21%

Situs tax is also not applicable to South African investors in the Smart International Income Portfolio as all the underlying investments are registered funds domiciled in Ireland.

* An Exchange-Traded Fund (ETF) is a type of low-cost pooled investment which is designed to track a particular index, sector, or basket of securities. They are purchased and sold on a stock exchange (like an individual equity) and provide efficient access to a range of diversified investments, including investment grade credit and bonds.

Multi-jurisdictional Tax Reporting

In addition to biannual portfolio reporting, investors may select the tax year in which they would like to download their investment reports.

Tax Clearance:

SARS permits an annual foreign investment allowance of R10 million for individuals, and an annual discretionary allowance of R1 million per year. The latter does not require a tax clearance certificate.

If you have reached your individual limit for the year then you can make use of the Marriott asset swap capacity at no extra cost. Please contact the Client Relationship Team for more details.

Local Investments

What do you want to do?

Minimum investment

Product

Grow your wealth but have access to it when you need it.

R500 lump sum and/or R300 debit order

Unit Trusts

Draw an income from your retirement savings.

R50,000

Living Annuity

Draw an income from your personal wealth savings.

R50,000

Income Solution

Save for retirement in a tax efficient way.

R10,000 lump sum and/or R300 debit order

Retirement Annuity

Transfer your retirement savings when changing employment.

R50,000

Preservation Fund

Offshore Investments

What do you want to do?

Minimum investment

Product

Invest in an offshore share portfolio.

£25,000

International Investment Portfolio (GBP)

Invest in a direct UK real estate Fund.

£10,000

First World Hybrid Real Estate plc (GBP)

Invest in currency accounts in £ or $.

£25,000 or $30,000

Smart International Income Portfolio

Invest in offshore unit trusts.

£1,000 or $1,000

Unit Trusts (USD and/or GBP)

Invest in global unit trusts.

R500 lump sum and/or R300 debit order

Unit Trust Feeder Funds (ZAR)

Preservation Fund

Where

Minimum investment

Product

I am transferring from a ...

R50,000

Pension Fund

I am transferring from a ...

R50,000

Provident Fund