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Other types of offshore funds
Other types of bond or stock

OFFSHORE

Stock and Bond Fund

(Also called International Bond Fund)

You invest in a sub-fund of an investment company in shares which reflect the value of fixed interest stocks denominated in a foreign currency and held by the fund. Some specialise in stocks in one area, e.g. North America, Europe, Australasia. Or alternatively the fund may invest worldwide. By using derivatives the managers may invest in a different currency profile from that indicated by the denomination of the bonds.

Offshore Stock and Bond Fund is a relatively risky investment because you can make or lose money from changes in exchange rates as well as changes in interest rates.

Who can invest Anyone.

How worthwhile Suitable for people who expect interest rates to fall in the country or area they choose to invest in thus boosting the capital value of the fund. If the currency or currencies in which the fund is denominated in strengthen, then there is extra scope for a capital gain. Taxpayers should probably use distributor funds see Tax. Compare with Stock Unit Trust Invested in a Fund of Eurobonds.

Minimum Usually £2,000-£5,000

Maximum None.

Suitable Lump sums.

Money back Usually 4-7 days at the market price.

Interest Variable. Called dividend or distribution. Some funds accumulate interest. You hope to make a capital gain by selling for more than you buy; you may lose money if bond prices fall with a general rise in interest rates.

Interest paid Half-yearly by cheque to you; direct to a bank account or accumulated within the fund.

Tax Not deducted. If you are a UK resident and a taxpayer you are liable to pay tax on the income. Accumulation funds: If the fund accumulates more than 15% of its income UK residents are liable to income tax instead of capital gains tax on any gain you make when you dispose of your shares or switch to another sub-fund. Distributor funds: Capital gains on disposals or switches are liable to capital gains tax.

Fees to pay Initial5%. Yearly: (including custodian fees): 0.925%-1.175% .

Passbook None. Statement issued with each transaction.

Children Under age 18, shares must be held in an adult's name and may be designated with the child's initials.

Risk High. The price of units fluctuates down as well as up. There are compensation schemes for recognised funds. You need to know whether your fund is recognised.

How to invest Phone or write for details; ask for a prospectus and read it carefully. If you are investing a large amount, say, £30,000 or more, ask for a reduced initial charge. You can buy and sell by phone. Magazines like Money Management list funds and performance. Also see the Financial Times Offshore Funds page for prices, yields and recognised funds.

Where from An Independent Financial Adviser which offers discounts.

Other types of offshore funds
Other types of bond or stock

Last updated 17 December 2007.