The recent amendment to Regulation 28, which sets certain limits for retirement funds on how to invest, has far-reaching effects on investors. Off the back of these changes, a Regulation 28 compliant CIS portfolio will now be permitted to have aggregate exposure, as shown in the table below.

Asset Class	Previous Reg 28 limit	New Reg 28 limit
Global (excl. Africa)	30%	45%*
Rest of Africa	10%
Infrastructure (local and global)	unspecified	45%
Private Equity (local and global)	10%	15%
Hedge Funds	10%	10%
Housing Loans	95%	65%
One entity, besides debt instruments issued by, and loans to, government	unspecified	25%

Provide an investment memorandum advising South African investors (Pension Fund and Unit Trust holders) on managing foreign exchange exposures for their investments denominated in South African rand, given these changes on Regulation 28. In so doing include the following key components of international diversification:

1. Reasons that investors should consider constructing portfolios that takes advantage of the offshore limits.
2. The changes in risk that occur when investors add international asset classes to their portfolios.
3. The potential expected return and standard deviation for asset portfolio containing a domestic asset and a foreign asset class.
4. Demonstrate how changes in currency exchange rates can affect the returns that investors earn on foreign security investments
5. Explain the effect of international diversification on the efficient frontier by comparing a frontier that includes foreign investments with one that does not.
6. Discuss the influence of time differences between countries on the correlation of daily returns i.e., MSCI AWCI Index has constituents from 23 countries with varying time.