What is the optimal offshore allocation for South African investors?

In 2022, the South African Pensions Fund Act was changed to allow funds to allocate up to 45% of their portfolio to offshore investments. This is a material change to fund regulations and naturally prompts the question: what is the optimal offshore allocation? In this research, we implement two allocation frameworks commonly used in practice and show that such a question has no universally optimal answer and that any solution will be determined principally by five investment factors, with the most important of these being an investor's return objectives or risk limits, and the investor's ability to hedge currency risk. Based on these factors, we suggest practical guidelines to aid in setting strategic offshore allocation policies.