The 'B' word

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.