The 'B' word

bowlhead99

qwert_yuiop wrote: »

Why would anyone have most of their money invested off shore unless they thought the pound was going to crash or the U.K. was in for a recession? If you truly believed brexit was about to lead us into a land of milk and honey, you’d have every penny here where the economy is poised to rocket. Probably.

Companies listed on the UK stockmarket only represent about a twentieth of the total value of world stock markets and the UK is only about a fortieth of world GDP on some measures. So whether or not you think Brexit is a good or bad thing, most investors (from individuals to big institutions such as pension funds and insurance companies) have a large proportion of their investments invested in foreign assets because it makes sense to be diversified.

If you are an investment firm looking to source capital from international investors and invest that money collectively, internationally into investments around the world. You will likely site your investment fund somewhere that has a good network of international tax treaties and the ability to easily market to investors from lots of countries without regulatory hassle (eg Ireland) and/or that has low running costs and minimal local taxes levied on the fund itself (e.g. BVI).

This is so that your diverse pool of investors accessing the underlying international investments through your fund are no worse off from a tax perspective than if they had simply invested directly into the underlying investee companies or bonds or properties themselves from whatever countries they are based in, instead of using your fund. Such 'tax 'neutrality' combined with low regulatory and admin cost is very important for an investment fund.

So a large number of investment firms use 'offshore' mixer vehicles to hold the assets, either instead of - or in addition to - UK companies and partnerships. The investment firms may invest abroad, at home, or a mix of both.

I have some foreign domiciled funds or investment companies in my portfolio - Ireland, Guernsey, Jersey, BVI etc. So does my Mum, in her ISA. So too, probably, does your local council pension fund. So - as we learned from stolen information from a law firm in 'the Paradise Papers' - does the Queen's estate.

Ooh, isn't that embarrassing if we are all supposed to be patriots?

No, it's not terribly embarrassing. It's perhaps embarrassing for the financial journalist who makes a sensationalist headline about it which he sends around Facebook as a rallying cry for the poorly educated to get excited about, as a piece of political theatre - because he is only relying on innuendo and a lack of knowledge to make people interested in it. If he was posting it on an investments forum or in a financial publication, people would shrug and say so what, this is a non story, you clearly don't understand international finance.

Albermarle

Anyway I would have thought that Rees Mogg , aka ' the honourable member for the eighteenth century '
would have his money still held in guineas, so would have trouble investing it in the hated lands over the Channel .:D

qwert_yuiop

IanManc wrote: »

Malthusian said "abroad" not "off-shore".

There is a difference.

If someone invests in a global tracker - which is a very mainstream and sensible thing to invest in - then most of their money is invested abroad, with about 5 or 6% in the UK stock market.

And if people believe that Brexit will lead to a land of milk and honey they'd still be sensible to invest globally.

All right - abroad is a better word. Offshore has a certain implication, but if most of your money is abroad it’s hardly a vote of confidence in the U.K. . Yes, all right, some money overseas ( is that all right?) as a spread and insurance , an each way bet in effect, but to have “ most” of your money elsewhere sounds a bit like capital flight in the style of wealthy Brazilians , Argentinians , Zimbabweans etc avoiding a currency crash.

dunstonh

but if most of your money is abroad it’s hardly a vote of confidence in the U.K.

UK Large cap has been one of the worst performing areas for the best part of 25 years. It doesn't inspire confidence.

The UK is around 4% of global GDP. So, most investors should have around 4% UK equity in their portfolio. Some will introduce a bit of home bias which may take it towards 20% but the bulk of the equity content will not be in the UK.

qwert_yuiop

...but what about those sunlit uplands post brexit? Do you believe brexit is going to be a superb success or not? If it is, get ready for the biggest stock market boom of our lives. Fill your boots, people.

dunstonh

? If it is, get ready for the biggest stock market boom of our lives.

Actually, the value of investments will likely fall if Brexit is successful. All the gains made when Sterling fell will be undone by the rise in Sterling.

Malthusian

qwert_yuiop wrote: »

All right - abroad is a better word. Offshore has a certain implication, but if most of your money is abroad it’s hardly a vote of confidence in the U.K.

I invest money to make money, not patriotic gestures. If I want to make a vote of confidence in the UK I'll attend a sports match, wave a paper flag and sing rude songs.

Anyone who invests their money to make "votes of confidence" in one country or another is an idiot. Rees-Mogg is many things but an idiot is not one of them.

Yes, all right, some money overseas ( is that all right?) as a spread and insurance , an each way bet in effect, but to have “ most” of your money elsewhere sounds a bit like capital flight in the style of wealthy Brazilians , Argentinians , Zimbabweans etc avoiding a currency crash.

Total nonsense.

In the days when accessing overseas stockmarkets was difficult and expensive, being mostly invested in your home country was defensible. For decades a globally diversified portfolio has been the default sensible position.

qwert_yuiop

dunstonh wrote: »

Actually, the value of investments will likely fall if Brexit is successful. All the gains made when Sterling fell will be undone by the rise in Sterling.

Yoicks. I don’t think that’s what’s supposed to happen.

qwert_yuiop

Malthusian wrote: »

I invest money to make money, not patriotic gestures. If I want to make a vote of confidence in the UK I'll attend a sports match, wave a paper flag and sing rude songs.

Anyone who invests their money to make "votes of confidence" in one country or another is an idiot. Rees-Mogg is many things but an idiot is not one of them.

Total nonsense.

In the days when accessing overseas stockmarkets was difficult and expensive, being mostly invested in your home country was defensible. For decades a globally diversified portfolio has been the default sensible position.

It’s not a patriotic gesture.
The vote of confidence would be in your belief that brexit is going to be a resounding success. A belief that you evidently don’t hold.
We’re in total agreement here. I think it’s a hames and so do you.

qwert_yuiop

dunstonh wrote: »

UK Large cap has been one of the worst performing areas for the best part of 25 years. It doesn't inspire confidence.

The UK is around 4% of global GDP. So, most investors should have around 4% UK equity in their portfolio. Some will introduce a bit of home bias which may take it towards 20% but the bulk of the equity content will not be in the UK.

If we’re 4% of gdp, surely the wonder that is brexit will lead us to new heights of wealth and our proportion of world riches will rocket. To stick to a boring pro rata position is to miss the opportunity of a life time, surely?
“I wonder what all the poor people are doing today”.