Alleviating Investor concerns with Offshore Jurisdictions

These days, investors are quite interested in searching for jurisdictions that are capable of offering stability without legal, economic, or regulatory surprises.

Research indicates that clients located in the Middle East have started to slowly refine their perspective on investment structures. Moreover, about 75% of the customers now test their wealth structures by stress testing, while 42% believe that reputation is a an important factor while deciding on a jurisdiction that can support their requirements for international investment.

This pandemic has given opportune time to many stakeholders, especially in the funds industry, to evaluate and consider incorporation and domiciliation considerations. Family offices and private investors are receiving pessimistic news from financial advisors on a consistent basis. There has been contradictory advice about what the most efficient risk minimization strategy and route should be.

It is of high importance to be practical while considering the information given. Advice provided on time, combined with consideration of all elements, centered on the investors and their investments, is critical to minimize errors that can cause complications.

Furthermore, the views of stakeholders show that offshore jurisdictions are driven by:

• Distress of instability (25 per cent)
• Geopolitical climate
• Succession planning and privacy (25 per cent)
• Confidentiality (17 per cent)
• Asset Protection (17 per cent)

This adds up more motivation for customers’ initiatives towards asset structuring and diversification on a global level.

In times of uncertainty like these, it becomes very crucial for investors to heavily rely on corporate governance levels. Recently, in the region, high profile insolvencies have provided insight on companies that have less external and robust internal governance, which led to considerable loss in equity. Therefore, investors and managers are placing more value on the effectiveness of the regulators’ ability and the robustness of external oversight so that acceptable standard supervision can be provided.

Stress test structures and analysis of quality, along with the amount of professionalism of IFC, International Finance Centre, where they are facilitated, is urged to wealth managers and HNWIs.

Unsatisfied over Costs

Investigation on fund domiciliation reveals that an important determinant in the selection of domicile is whether investors respect a jurisdiction or not. This is especially the case when most of the investors are family offices. The research also uncovered that there is dissatisfaction towards increased costs recently, in the international fund jurisdiction, especially in European Union.

However, some investors believe that the growth in regulations has made a big contribution in increasing costs which ultimately have to be paid by them.

The best way to go about is to seek an internationally recognized, robust compliant platform that can structure diverse investments, while GCC investors investigate on ways to capitalize low assets valuations with major currencies and depreciation in sterling. While heading towards robust regulatory standards, installing suitable reporting and governance procedures and consolidating information is important.

There is a lot of potential for the industry of funds advisory to educate their base of clients and expand, therefore, increasing the broader wealth management’s reach in the area. Offshore jurisdictions can show their regulation, transparency, and quality, in this prospering new environment, as many GCC businesses are looking for a strong reputation while selecting an IFC.