Magazine article Management Today

Home Front PEPs Up

Magazine article Management Today

Home Front PEPs Up

Article excerpt

HOME FRONT PEPS UP As far as investment in offshore funds is concerned, the recent past has been erased and the future has been brought forward to the present. The past, of course, focused on overseas vehicles such as Barlow Clowes International, which rewrote the line about beating swords into plough shares and transformed gilt-edged securities into helicopters and luxury yachts, wiping out the life savings of a number of investors in the process. The future, of course, is dominated by the single European market and the right of all good EC citizens to sell their wares to other residents of the Big Twelve.

At a stroke, new clauses of the Financial Services Act allow offshore investment funds to be legally dangled by the marketing man before the eyes of the British public. Until this year, it has been illegal for such funds to be advertised to UK residents, although there was nothing to stop them buying them -- like the wrong sort of films in your local video shop, they had to be asked for and could not be offered unsolicited.

One part of the new legislation allows funds based in designated territories -- Jersey, Guernsey, the Isle of Man and (soon) Bermuda -- to apply for permission to be marketed here, on the grounds that their home base has laws designed to protect the investor which are deemed to be as good as our own. Note, incidentally, the conspicuous absence on this list of Gibraltar, stamping ground for P. Clowes. The other relevant part of the new legislation covers the marketing of funds within the EC.

In theory, these changes should provide unit trust groups with global ambitions with another notch in their belt. In their ideal world, groups such as Wardley, Fidelity, GT, Templeton and so on would like to have one fund, based in one financial centre, to offer to investors all around the world -- instead of having to develop different funds tailor-made for different countries.

And in this ideal world, Luxembourg would be the place to do it; a scandal-free financial centre that does not tax fund income at source and has no sizeable domestic demands for investment itself. From this base, management groups can offer 'umbrella' funds that allow investors to put their money into a variety of equity, bond and money markets and switch around at will, free from any domestic restraints. No wonder fund management groups rubbed their hands with glee as they anticipated a new bait with which to lure the sophisticated, tax-conscious investor.

Reality rarely matches theory, of course, but the speed with which the former clobbers the latter over the head can rarely have been as impressive as in this case. …

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