Finding Security in Offshore Funds

When it comes to deciding on secure investments, offshore funds, located outside of one’s national boundaries, can serve as valuable opportunities. Offshore funds are a great mechanism to take advantage of some tax benefits. Moreover, offshore funds and trusts are often less restricted by National financial parameters and guidelines.

Offshore mutual funds offer lower costs and operating fees because of their reduced regulation requirements. According to Investopedia, offshore funds offer eligible investors significant tax benefits compared to funds in many high-tax jurisdictions. For example, US domestic mutual funds are a tax disadvantage for international investors from outside the U.S. because dividends from these funds are typically subject to the high tax rates the U.S. has for non-citizens. Rates can be as high as 30% on certain types of income paid out by the US domiciled funds.

Offshore funds are often managed in a similar way as domestic funds are. Many of these offshore tax-haven locations are considered investor friendly and a thorough investigation will discover which are regarded as financially secure.

Although many offshore funds are quite legitimate, there are many that are run as unknown entities and should not be trusted. Never invest in an offshore account located outside of established financial centers. Such offerings may be more susceptible to scams because of relaxed regulations in some offshore locations.

Offshore trusts are similar to offshore funds. An offshore trust is very comparable to a traditional trust in that it involves a binding legal agreement (or trust deed) between the trustee, settler, and beneficiary. Trusts are designed to protect assets from undesired parties. Benefits and distributions are made to the stated beneficiaries according to the trust deed.

It’s true that offshore trusts are generally formed in low-taxation areas such as Switzerland or the Cayman Islands, but decreased taxation is not the only characteristic of a good offshore trust or offshore fund. Many countries simply are home to renowned, experienced trust companies that offer extreme confidentiality and substantial asset shields. Offshore jurisdictions frequently modify their laws to make their jurisdiction attractive to potential investors. An ideal trust location should display proven successful management of trusts.

Our experts at Paradigm Capital Management frequently stress that offshore trusts and funds should be incorporated into every investor’s asset allocation model. Forming an offshore portfolio can provide protection from untoward scrutiny, litigation, and civil strife. It should be apparent that while the cost of the formation and maintenance of a trust fund may be considered high, the establishment of an offshore trust will provide for sound peace-of-mind for those looking to protect their wealth and provide for their children in the long- term.

International banking systems exist which allow you to maintain accounts in different currencies, eliminating the risk of foreign exchange for transactions involving offshore funds. Such institutions may offer the ability to manage an account from anywhere in the world, and they will offer the ability to send funds across continents with no fees. They are not typically prone to interest rate restrictions and reserve requirements common to domestic lenders.

For more info you can consult with us at Paradigm Capital Management. With a long history of small-cap investing, Paradigm Capital Management employs a disciplined, bottom-up approach with an emphasis on fundamental analysis and extensive management contact.

Our strategies are available through separately managed accounts, mutual funds, and onshore and offshore long/short funds—all of which draw upon the same fundamental research and investment process that have been the key drivers behind our significant, long-term outperformance.

To learn more about how Paradigm Capital Management’s capabilities align with your long-term goals, please contact us at (518) 431-3500