Investment funds are companies that pool capital from many investors and often invest in stocks, bonds or currencies domestically or internationally. An investment fund has a particular mandate or an investment goal such as investing in the U.S. large cap stocks or Asian bonds. The investment funds can be growth, value, sector, country, or region oriented. A portfolio of the investment fund typically contains a large number of securities, offering a variety of choices and diversification to you as an individual investor. As a shareholder in the investment fund, you can participate in the income and capital gains generated by all the fund’s investments.
There are generally four types of investment funds. They are open-end mutual funds, closed-end funds, exchange-traded funds (ETFs) and hedge funds. Retail investors typically invest in the first three types of the funds while the more sophisticated investors, such as institutions and high net-worth individuals, invest in the hedge funds.
People are often confused by the terms global investment funds and international investment funds. The former includes investments in the entire world while the latter includes investments in the entire world except those securities located outside of your home residence.
Understanding the Benefits and Risks
Stepping into 2013, investors and savers continue to be concerned about the low economic growth, low interest rates and political fighting in the developed countries. Terms such as fiscal cliff, sovereign debt crisis, hard landing and banking crisis are popping up almost on a daily basis in the newspapers.
Where can you find investments with potential higher returns and lower volatility? The answer lies in international investment funds. In 2012, nine out of the 10 top-performing stock markets in the world are outside of North America or Europe. Due to the higher growth potential of foreign countries and companies, and their better economic fundamentals, international investments can offer attractive longer-term returns. Although international investment funds are typically more volatile than domestic investment funds, adding international investments can further diversify portfolio risks due to their lower correlation with the home country’s investments.
There are additional risks associated with international investing, which can be grouped under sovereign risks. Sovereign risks comprise of currency risks, political risks and market structure risks. Market structure risks typically refer to the inefficiencies of the markets in the areas of corporate governance, shareholders’ protection, accounting standards, transparency of company earnings and bankruptcy procedures. By investing in international investment funds, you can rely on the professional investment managers, who actively do due diligence in these countries and companies and understand the investment risks.
Investing in Offshore Funds in Belize
Being a premier offshore banking center in Central America, Belize not only provides tax benefits to investors but also asset protection. Investment funds set up in Belize generally do not incur taxes on capital gains, dividends or income. There are no exchange controls on offshore mutual funds registered in Belize. At the same time, your investments are protected under the Belize Mutual Funds Act 2000, which regulates the fund’s registration as well as the licensing of the investment managers and administrators. Investing in international investment funds set up in Belize can help your portfolio to grow faster due to the above offshore banking advantages, without sacrificing your investment choices.
