Offshore funds to debut in IMA sectors
Offshore funds will be included alongside their onshore counterparts in sector classifications for the first time next month.
The Investment Management Association (IMA) provides sectors for onshore funds according to their type, such as UK all companies, global bonds and absolute return.
From 1 April 2010, 71 offshore funds will begin to be included in these sectors - meaning investors will be able to more easily compare onshore with offshore funds. This could lead to increased demand for funds domiciled abroad, such as in Dublin, Luxembourg or Channel Islands.
It is anticipated that further offshore funds will be included in the sectors later this year.
The IMA will flag which funds are offshore so that investors and financial advisers may search for just onshore or offshore, depending on their requirements.
Jane Lowe, director of markets at the IMA, says: "The inclusion of offshore funds into IMA sectors is a natural evolution for our classification system and takes account of the intended flexibility for distributing European funds.
"The change should make a wider choice of funds available to investors and allow offshore fund providers to market their funds on an equal footing to UK domiciled funds."
Onshore emerging markets funds are one area that could be hit by better-performing offshore funds invading their sectors and charging straight to the top of the performance tables.
At the end of last year, HSBC Global Asset Management and Baring Asset Management compiled data that showed the top three performing funds in the China, India, Latin America, and global emerging markets categories over the past year were offshore - based in either Luxembourg or Dublin, rather than the UK.
The practice of locating your financial affairs (banking, savings, investments) in a country other than the one you’re a citizen of, usually a low-tax jurisdiction. The appeal of offshore is it offers the potential for tax efficiency, the convenience of easy international access and a safe haven for your money. However, offshore is governed by complex, ever-changing rules (such as 2005’s European Union Savings Directive) and, as such, is the exclusive province of the wealthy and high-net-worth individuals.
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.