Offshore Funds – Advantages and Associated Risks

Offshore funds are a variety of mutual funds that invest in foreign countries and avail the benefit of growth in a different country. This post discusses offshore funds with their advantages and associated risks.

Offshore funds

What are Offshore Funds?

An offshore fund is an investment fund (or mutual fund) that invest in international market. This fund may be a unit trust or a limited partnership or investment fund of an asset management company. These funds are specialized in investing the asset in securities of foreign companies or corporations. The offshore funds have non-resident investors. They are monitored and regulated by the regulations of the country where they are registered. In India, they are regulated by the directives of the Reserve Bank of India (RBI).

These funds have the international domicile and they provide the investment exposer in offshore market. They offer cost benefits to its investors in form of lower taxes because of collective investment. In India, these funds are available as country-specific funds or thematic funds. An offshore fund is required to have the following functionaries:-

  • An Administrator
  • A Fund Manager
  • A Custodian
  • A Prime Broker
  • An Authorised Representative

Advantages of Offshore Funds

These funds provide the following advantages:-

  • It provides the opportunity to invest in the companies which are not listed for stock trading in the country.
  • Direct investments to foreign companies or foreign securities have so many regulations and taxations. An offshore fund provides this facility in an indirect mode easily and at a lower cost,

Risks with Offshore Funds

There are following risks associated with these funds:-

  • Currency Risk: Fluctuation in the foreign currency exchange rate affects the investment value.
  • Shifting of Offshore Fund Activities
  • Amendments in the taxation system from foreign countries.

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Disclaimer: This post does not give any advice or recommendation. Mutual Fund investments are subject to market risk. Please read all the related documents carefully before investing. It is also advised to consult your financial advisor for necessary suggestions. 

Tags: #mutual funds #investments #Offshore Fund #Foreign Invesments

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