An offshore fund is any fund, such as a mutual fund, that exists in an offshore financial center. Places that offer little or no government interference, such as Hong Kong, Jersey, and Antigua have offshore financial centers. A mutual fund in British English is a unit trust.
An offshore fund, if you are American, for example, exists outside the United States. We commonly use the term, perhaps incorrectly, to describe funds that exist in tax havens or low-tax nations.
Technically, offshore funds are simply funds that exist and operate abroad. However, if you do not specify, most people will think it is a fund in a tax haven.
A ‘tax haven‘ is a country or territory that offers amazingly favorable tax rates and other conditions. Antigua, the Cayman Islands, Jersey, the Isle of Wight, and Gibraltar are tax havens.
In its widest sense, we use the term to include any cross-border collective investment scheme.
While most people think of a mutual fund, an offshore fund refers to any collective investment scheme. Specifically, a collective investment scheme that operates abroad.
Definition of ‘offshore’
The term ‘offshore’ in business and finance means any country other than your own. In other words, foreign or overseas.
If you have an offshore bank account, it means a bank account abroad. An offshore company is registered in one country but is active in another.
Offshore manufacturing means relocating a production plant abroad, and importing the finished product. In other words, making it abroad and selling it in the home market.
If I create a trust abroad, it is an offshore trust. They are usually outside the jurisdiction of the country of residence of the trustor (trust’s creator).
The term ‘offshoring’ means relocating some of a company’s operations abroad.
Offshore fund global market
We measure market share in offshore funds either by AUM or the number of funds. AUM stands for Assets Under Management.
For example, the dominant player in hedge funds is the Cayman Islands. However, Delaware dominates in offshore private equity funds.
The first image below shows us the market share for offshore hedge funds. The second image focuses on offshore private equity funds.
Assets Under Management (AUM) measures the total market value of all the financial assets of a fund. The term may refer to a venture capital firm, mutual fund, or brokerage house. Funds Under Management (FUM) means the same as AUM.
Compound words with “Offshore”
The term Offshore Fund is a compound word using the word Offshore. Here are some more compound words with Offshore:
Offshore Banking
Banking services provided by a financial institution outside the account holder’s country, often for tax benefits and privacy.
Offshore Investment
Investing capital in a foreign country to take advantage of favorable tax laws and other financial benefits.
Offshore Company
A corporation or LLC established in a foreign jurisdiction for legal and financial advantages. LLC stands for Limited Liability Company.
Offshore Funds
Investment funds organized in tax havens, often used by investors to gain tax advantages or privacy.
Offshore Jurisdiction
Territories that offer legal and financial advantages like tax holidays, privacy, and limited regulation.
Offshore Account
A bank account maintained in a foreign country, often to benefit from reduced legal restrictions and taxes.
Offshore Trust
A trust established under the law of a foreign country that may offer financial benefits like asset protection and tax savings.
Offshore Incorporation
The process of establishing a corporate entity in a foreign jurisdiction.
Offshore Haven
A country or jurisdiction that offers favorable tax and privacy laws to foreign investors and businesses.