|
|
 |
Alternative
Investment
Alternative
offshore investments
Most expats are familiar with offshore funds and the international
stock markets, but there are a number of other lucrative
opportunities available to British expats living abroad.
Ariane Buteux explores the alternatives open to those
looking for a new type of investment…
Offshore investing refers to a wide range of investment
strategies that capitalise on the advantages available
outside of an investor’s home country. As a rule
of thumb, the best thing to keep in mind when taking the
plunge into offshore investing is that although the investment
may potentially be more profitable, it is largely due
to the fact that it is also more risky, and thus there
is less of a safety net if things go wrong.
Spread betting
Spread betting is a flexible technique used for speculating
on financial markets and sporting events which has seen
a huge growth in popularity over recent years.
Bookmakers who specialise in spread betting accept both
online and telephone bets, and all follow the same principle;
the bookmaker makes a prediction about the result of a
future event in the form of high and low estimates and,
quite simply, if you believe the current level is going
to rise you place a ‘buy’ bet or if you it
is going to fall you place a ‘sell’ bet.
Bets can be made on any event for which there are upper
and lower limits, although majority of bookmakers tend
to limit themselves to the financial markets and sporting
and political events.
The main advantages are thus; you pay no stamp duty, your
profits are tax free, there are no direct commissions
or fees paid to the company you are betting with, and
smaller bets are accepted therefore enabling you to limit
risk.
You can bet on all types of finance including stock market
indices such as the FTSE or NASDAQ, individual shares
from the FTSE 100 and FTSE 250 and leading US and European
shares, the change in different currencies, commodities
such as metals and oil, short and long term changes in
interest rates and futures, bonds & options.
There are some disadvantages to spread betting though;
certain markets can be extremely volatile and you have
to pay close attention to avoid a loss, it is less suited
to the long-term investor, and investors do not benefit
from dividends.
For many investors, spread betting has quickly become
the most flexible and cost efficient alternative to trading
ordinary shares, especially because you can profit from
both falling and rising markets simultaneously. However
you need to remember that the transaction is in essence
a bet rather than an investment, making it far riskier
than traditional fixed odds betting where participants
are usually a little more protected.
Hedge Funds
Hedge funds are investment partnerships that put money
into a variety of securities and seek above average returns
through active portfolio management. The ‘hedged’
part of the title basically means that, to a certain degree,
they are protected from market volatility, and they can
hold both long and short positions. Generally speaking,
they do not raise funds via public offerings and are not
allowed to engage in marketing or advertising.
Hedge funds are usually only offered to a limited number
of affluent investors and institutional clients, and as
the minimum deposits are usually quite steep, direct hedge
fund investment should really only be considered by those
with substantial liquid assets that they can easily do
without for a year or more, as investors are subjected
to a period of at least a year before they can make withdrawals.
Hedge fund managers, who are likely to have a substantial
amount of their own money invested in the fund, are free
to utilise more unconventional and potentially 'riskier'
investment strategies in order to secure higher returns
for the fund investors.
They tend to focus on sectors with favourable growth prospects,
including health or technology, emerging financial markets,
long and short investing in equities, companies experiencing
financial differences, companies going through mergers,
acquisitions or liquidations, or short selling in companies
with unfavourable profits.
When investing, it is as beneficial to look at the general
background of the fund – who is involved, how the
responsibility is divided between them, the relationships
and possible conflicts of interest, the other investors
(onshore or offshore) – and, most importantly, the
profile of the manager.
A lot of the legwork will be done for you, and if you
enjoy seeing your investments hedged against market volatility
then this is probably a very good vehicle in which to
place your money.
Ethical Funds
Investing ethically means that you can match your financial
decisions with the same morals you apply to the rest of
your life, allowing you to make a profit with a clear
conscience. Today, over three quarters of investors would
not want to channel their money into companies which have
poor social, ethical or environmental policies.
Some ethical funds use a screening process to decide which
businesses to invest in, while others seek out companies
that comply with a list of positive policies. One main
worry is that the strict screening method used by some
of these funds may mean they will under perform their
non-ethical counterparts, but this is not true and can
indeed be quite the opposite when you have a good fund
manager on board.
When choosing an ethical fund it is important to remember
that not all of them operate in the same way. Ethical
funds tend to avoid companies which are associated with
alcohol, tobacco, weapons or gambling in any way. In addition,
due to the nation’s increasing social awareness,
some also make a point of avoiding organisations negatively
associated with animal welfare, the destruction of the
environment, pollution, intensive farming, pornography
and the infringe of human rights
However in recent years the focus has shifted towards
considering the positive aspects of a company’s
attitude towards ethical issues rather than simply judging
them by the negatives. This form of screening is known
as ‘Socially Responsible Investment’ or SRI,
and the positives they look out for include equal opportunities
policies, the conservation of energy and fair trade.
The good news is that there are a number of SRI funds
based offshore which accept investments of as little as
£500, making them widely available to all investors.
Another big bonus is that SRI funds have been found to
be both less volatile and less risky than normal funds.
Offshore ethical fund providers include Sarasin, Friends
Provident International, UBS Fund Services, Royal Skandia
and Credit Suisse.
Forestry
Forestry might be seen as a relatively unusual form of
investment, but there is substantial evidence to show
that the number of people acquiring timberland in recent
years has risen quite dramatically. It offers competitive
returns, low risks, and is an effective diversification
from financial assets. However, it is also a relatively
illiquid, long-term investment which will take about ten
years to see returns.
You can invest in one of two ways; either indirectly by
purchasing shares in an established forestry investment
company, or directly which involves buying the actual
land on which the trees stand.
There are two main risks; market risk and natural risk.
The former is associated with harvesting as the stumpage
(the price paid by loggers for the wood on the stump)
can be depressed at the proposed time of cutting. Natural
risk comes in the form of fires, storms and insects which
are very all very damaging. The forest can be insured
up to a point but your investment is largely at the mercy
of nature – just make sure you are not buying in
a place known for disasters!
The good news is that many forestry investment schemes
welcome expats with open arms, and the best countries
for investment are Australia, New Zealand, and South &
Central America. It is important to look for an affluent
area which has the good, necessary resources for planting,
tending, and harvesting. It is also wise to make sure
that the site is reasonably close to a port as land transportation
of timber is usually costly and can deter buyers.
As it is a very specialist field the expertise of the
manager is key and, generally speaking, the more experienced
they are, the better the eventual returns. The forest
also needs to be audited annually to make sure that finances
are being used appropriately and that the site is being
managed in the best way.
Wine
Investing in wine is by far the most popular type of non-financial
alternative. The investment itself takes two basic forms;
you can pump your cash into a particular wine producer,
vineyard or region by purchasing shares listed on any
of the major stock exchanges, or you can concentrate on
amassing actual bottles of wine.
It is important to make sure that when taking the latter
route, you differentiate between collecting and investing.
A wine collector will keep a cellar full, taking a bottle
out and savouring it when desired, yet as an investor
your wine will be stored in your cellar specifically for
a well-timed resale. However most agree that the ideal
wine specialist is a healthy balance of collector and
investor.
Wine has the potential to out-perform all other investments
in its field, as well as offering better returns on the
initial outlay than the more widely recognised stocks,
bonds and property markets. However to capitalise on this,
you need to be able to correctly predict which wines will
be in demand in the future, thus allowing you to buy low
and sell high.
It is always going to be a far riskier form of investment,
especially due to the fact that demand for indulgent goods
such as fine wines is unmistakably linked with economic
health, therefore if money is tight then people will splash
out far less on ‘little luxuries’. Very few
wines appreciate regularly, but once a certain wine is
in fashion it will stay that way for a good period of
time. Another bonus is that the investment improves over
time because both the wine itself matures, and at the
same time stocks are continually in decline due to consumption.
Wine investing is really starting to take off with numerous
brokers and specialist schemes moving online. Services
range from catering for the inexperienced investor right
up to those with a fair bit of know-how, with one option
available being the storage of immature wines in bond
so that they benefit from tax exemption.
Some wines can be a lot harder to get hold of than others,
with the more inexpensive ones seeing the biggest increase
in popularity, so it is important to make sure you have
a diverse portfolio. Wine investing is a lot more personal
than any other investment, especially if you have a fondness
for a certain type of grape, but the onus remains fixed
on buying and selling when the time is right.
Racehorses
For most people, owning a racehorse or a part-share in
one is more likely to be for a bit of fun rather than
a serious investment. Latest figures indicate that around
60 per cent of horses are owned by more than one person,
showing how popular having a share in a horse has become.
However the best news for expats is that investing from
abroad is not that much harder than doing so from the
country where the horse is stabled.
The UK remains a favourite place both to race and own
horses, but it doesn’t matter whereabouts in the
world the horse is, just how much contact you want. Ever
evolving technology means that you can keep in constant
visual touch with the horse’s trainer via e-mail,
phone, digital pictures, videos and races which are screened
overseas.
If you are relatively new to the horseracing game, it
is probably more advisable to enter into a partnership
or join a club instead of going it alone. Those on offer
range from ‘cheap’ clubs with lots of members
investing a small amount of money per year, to more expensive
ones which comprise fewer people investing more. The main
benefit is that due to the volume of members, you are
able to invest in high-quality horses which will really
bring in the money.
You can check out a horse’s past performance through
the Racing Post’s website by logging in and searching
for information, although most trainers should be fairly
forthcoming about their track record. If you’re
really keen to get your hands on your own horse you need
to employ the help of a bloodstock agent though, who will
source and purchase horses for you.
On top of these costs you need to budget for the training
fees, stable fees, and racing fees said to add another
£16,000 onto each horse purchase per year. The best
horses can sell for millions, and although some have hit
the jackpot by buying a champion horse for a relatively
small price, if you want to invest in the big money horses,
it will more than likely cost you a six figure sum.
Alternative alternatives
With most forms of investment it is the individuals who
take a personal interest that make for the best investors,
and this is no different for collectors of vintage motor
vehicles, antiques or art.
High-quality art, antiques and vintage cars cannot generally
be resold quickly at a profit, but instead must be held
until their value increases sufficiently for a profit
to be made. Additionally if an investor’s portfolio
includes work by a recently deceased artist or craftsman,
the pieces in existence will see a significant increase
in individual value
These types of investments can prove to be advantageous
from both an aesthetic point of view, and one concerning
overall profit, although regular maintenance and comprehensive
insurance is of utmost importance. When investing, it
is probably wise to pick a particular movement or era
in an attempt to blend your portfolio together.
When investing large sums of money, it is important to
find a reputable, well-established dealer with in-depth
market knowledge who will be able to give you the best
possible advice. They will make sure you are buying good
quality, authentic pieces as cutting corners will not
see you make any form of profit. The rarer the investment,
coupled with its notoriety will stand you in good stead
allowing it to still appreciate in value during times
of market recession.
There are clear advantages in these forms of investment
with regard to taxation, aesthetic appreciation, protection
against inflation and diversification.
LINKS
www.britishhorseracing.com
www.eliteracingclub.co.uk
www.racingpost.co.uk/news/home.sd
www.fsc-uk.org
|
|
|
|
