Investing in offshore funds
Most of the funds we offer to UK investors are domiciled in the UK. This means that the investment manager keeps the assets in the UK and the fund manager is authorised and regulated by the UK Financial Conduct Authority (FCA).
We also offer funds that are domiciled in countries other than the UK. These are often called ‘offshore funds’ and are based in international financial centres in Dublin and Luxembourg.
These funds are registered for sale to investors in the UK and other countries but, unlike domestic funds, they aren’t directly overseen by the local regulator – the FCA, in the case of the UK. This means that investors in offshore funds could have fewer rights and protections than investors in UK authorised funds.
If you have an investment in a fund domiciled in a country other than the UK, you should check what rights you have under the local regulator that oversees that fund.
Offshore funds may provide more choice for investors
Fund managers may have a bigger range of funds available offshore than domestically. This lets them efficiently provide a wider range of strategies that may not have a large audience in any individual country.
AXA IM has a number of funds like this. For example, the AXA WF Robotech Fund and the AXA WF Metaverse Fund – both based in Luxembourg – are very specialised technology funds. It’s also a way to provide funds for investors in other currencies – for example, the Luxembourg-based AXA WF UK Equity Fund is for people who want to invest in UK companies in euros.
Taxation could be different in offshore funds
Investing in an offshore fund is not a way for investors to avoid UK taxes. Your returns will be subject to the same taxes as returns from UK-based funds.
However, there are administrative differences to the way offshore funds are taxed that can be important when you file your tax return. You should obtain tax advice if you’re uncertain about how this might affect you.
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Your investment may not be covered by the Financial Services Compensation Scheme (FSCS) or the UK Financial Ombudsman
Because offshore funds aren’t authorised by the FCA, investors are not necessarily entitled to all the protections that are provided to investors in domestic funds.
An important one to be aware of is the Financial Services Compensation Scheme (FSCS). The FSCS protects investors when UK-authorised financial services firms fail by paying compensation. Your investment is usually guaranteed by the FSCS up to an amount of £85,000 across all accounts held with the failed financial services firm.
You may also not be entitled to go to the UK Financial Ombudsman if you have a complaint about your investment.
You might be protected under these schemes if you invest through a UK financial adviser. But if you invest directly with the offshore fund manager it is very likely you won’t be covered. This introduces another layer of risk that you should consider before you invest.
Changes in the value of the pound can have an effect on returns
Investing in offshore funds often means investing in a currency other than pounds sterling, such as euros or US dollars. Changes in the exchange rate – the relative value of the pound to other currencies – will change the value of your investment, independently of how the value of the assets you are invested in changes. This is often called ‘exchange rate risk’.
This can be positive or negative. If the other currency rises in value relative to the pound, your holding will be worth more; if the value of the pound rises, your holding will be worth less.
This will only affect you when you come to cash your investment in – just like the other factors that can have an impact on the value of your investment – but it is another risk you should be aware of before you invest in an offshore fund.
Many AXA IM funds also offer a ‘sterling hedged’ share class, which aims to reduce the impact of exchange rate fluctuations against the pound. That way, the value of your investment may better reflect the performance of the underlying assets.
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Longer dealing times can have an impact on what you get when you buy and sell
There is often a delay between the time you let us know you want to buy or sell a fund and setting the price of the deal. As a result, there can be a difference between the value of your investment when you let us know you want to trade and the actual price when you buy or sell, especially if markets are moving quickly.
The length of this delay depends on how often a fund trades. UK funds typically trade at least once a day, and so the time between placing your trade and the manager putting a price on it usually won’t be more than 24 hours, depending on when the deal is received. For offshore funds, it can be two days or more.
A longer dealing time could mean a bigger difference between the value of your investment when place a trade and the value when the deal is priced. You should bear these timings in mind when you are buying or selling units in an offshore fund.
You may want to get advice before investing in an offshore fund
If you are unsure whether investing in an offshore fund is right for you, you should consider getting some advice.
You can find out more about getting investment advice on the page Investing in Funds.
How to invest in offshore funds with AXA IM UK
You can invest in an AXA IM offshore fund either directly from AXA IM or by using an investment platform or fund supermarket.
If you have any questions after you’ve made your investment, you should go back to the channel you used to invest. So, if you invest through a platform or fund supermarket you should address any questions to them rather than AXA IM.
You can find out more about how to invest from our Frequently Asked Questions.
Helpful information to help you understand your investments.