The South African rand remains one of the most volatile emerging-market currencies. This research examines 30+ years of data to quantify how currency swings affect real portfolio outcomes and what academic theory and historical evidence suggest about optimal asset allocation responses.
Key Historical Observations (1994–2025)
- Annualised ZAR/USD volatility ≈ 18–22%
- Maximum drawdown >50% (2001, 2008, 2018–2020)
- Offshore assets delivered ~4–6% higher real return when measured in rand
Portfolio Implications
Diversification Works
Unhedged global equity exposure has historically reduced portfolio volatility despite currency noise
Rebalancing Matters
Regular rebalancing captures volatility harvesting gains in rand terms
Time Horizon Is Critical
Currency effects dominate short-term outcomes but fade over 10+ year periods
Conclusion
For South African investors, moderate unhedged offshore exposure has historically been the most effective way to manage rand volatility — not currency hedging, which has generally destroyed value over multi-decade horizons.
Purely educational research. No recommendations are made.