|
|
 |
| |
Off-shore Mutual Funds
What is a Mutual Fund, Pooled Fund or Open Ended Investment Trust?
A mutual fund is basically a type of investment vehicle that allows individual
investors with a likeminded interest to pool their money and have the
benefit of professional money management. The professional manager has
the responsibility of selecting stocks, bonds or other investments that
are consistent with the fund’s goal or objectives. As an example,
investors participating in the Research Fund are doing so because
they want to own a portfolio of stocks involved in the research industry.
In reality, they are a part owner (along with the other fund investors)
of a very large investment portfolio. The portfolio may be a collection
of 50 companies worldwide that are involved in the research industry.
To duplicate such a portfolio themselves, investors would need to commit
a great deal of time and capital. But, with an investment of only $25,000
in the fund, the investor has the benefits of instant diversification and
the knowledge that a professional advisor is managing the portfolio for
them. Naturally, the fund manager receives a salary from the mutual
fund firm and may also receive a bonus that is directly related to how
well he or she manages the portfolio for the investors. All mutual
fund companies charge a management fee for the services they are providing.
Even so-called no load companies are getting their money from somewhere.
The equivalent British term to the
American “mutual fund” is “pooled fund” or “open investment trust”.
In reality, the open-ended trusts that can be seen listed in the London
Financial Times are the same type of investment vehicles as the American
“mutual fund”. To be sure, there are many more terms and detailed
explanations that go along with this. There are a number of investments in Europe
that have a different name, but in essence work the same way.
Why are Offshore Mutual Funds Tax-Free?
Just like some jurisdictions permit interest from bank
accounts to be tax exempt, the same is true for mutual funds. Some
of the more popular offshore mutual fund jurisdictions, such as the Cayman
Islands, Bahamas, Bermuda, Channel Islands or the Isle of Man permit mutual
funds to be exempt from local taxation as long as the investors are not
residents of these locations. Mutual fund companies use this to their
advantage.
Summary
A Mutual Fund is a company that invests most of its money in publicly traded securities
(stocks and bonds) of business corporations. It obtains
capital by issuing and selling its shares (common Stock) to
investors, who are the company shareholders.
Mutual
funds shares are not traded through stock exchanges or over
the counter markets; instead the Fund itself sells shares
whenever investors want to buy and repurchases shares at any
time at their current market value. The market value of a
mutual fund usually is based on the overall value of the
fund's portfolio of securities and fluctuates as the value of
the securities fluctuates.
After deduction of expenses
for management services, interest and dividend income is
declared as an income dividend and paid to shareholders,
usually four times a year or within a specified period after
demand is made. When a fund sells its investment at
appreciated prices, the profit is declared as capital gain
dividend and paid, usually once a year to
shareholders.
Types of funds
Public Funds
Offers any shares for subscription or
purchase to any member of the general public or any section
thereof and is not a private fund or professional
fund.
-
Must be registered and file a prospectus
with the Registrar of Mutual Funds.
-
Maintain adequate accounting records and
prepare financial statements.
-
Annual financial statements must be
audited by an approved auditor in recognized
jurisdiction and must be made available to all
investors.
-
Accounting records and audited financial
statements must be available to the Registrar of Mutual
Funds.
Private Funds
Less than 50 investors and the
constitutional documents prohibit the offering of shares to
the general public.
-
Must be recognized by the Registrar of
Mutual Funds
Professional Funds
Offered only to professional investors and
the initial investment in respect of each investor is not less
than US$100,000 (or equivalent) and is designated as a
professional fund by its regulations.
-
Must be recognized by the Registrar of
Mutual Funds
Jurisdictions
If you have questions please contact us.
|
|
| |
|
