IN484 - IOM Mutual Funds - For International Family Portfolios

Wealth preservation, return and management are core objectives for the majority of successful family office situations. The ability to consolidate resources and communicate clearly on performance can provide a family with huge benefits and save time and resources.

A mutual fund is an investment vehicle consisting of a pool of funds which can be collected from within the family for the purpose of investing in securities such as stocks, bonds, money market instruments and similar illiquid assets (property, unlisted stocks, commodities, etc.).

The 2008 credit crisis demonstrated that reliance on third party lenders can no longer be assured, and families are increasingly considering pooling funds with other family members to raise monies for capital projects and to achieve other objectives. 

Advantages of a Fund

The collective nature of a fund that prices the net asset value (NAV) periodically can achieve the following objectives:  

  • Consolidation of assets for easier management and reporting  
  • Investment control and setting objectives – consolidation of risk
  • Pooling resources to reduce cost
  • Collecting information about investments – to share knowledge
  • Monitoring the performance of managers
  • Reduced accounting and administration costs
  • Easier implementation of asset protection strategies

In What Circumstances is the Use of a Fund Most Effective?

Families are increasingly complex, with members often living in different jurisdictions with different investment and tax objectives. A mutual fund as a “partnership” based in a tax neutral jurisdiction can be advantageous. Partnerships have the unique advantage, from a tax perspective, of operating on a “look through basis”, and it is the partners themselves who are taxable, with each partner or family member undertaking his or her own tax planning.

  • This unique characteristic allows partners with different tax objectives to either delay a tax charge or decide to take the charge as capital or income.

A Partnership Agreement can be drafted in such a manner as to allow for succession planning.  Succession planning, one of the more difficult things that families have to talk about, can therefore be planned without regular discussion being required.

The consolidation of family wealth into a mutual fund means that investments can be made in any type of asset, from marketable equities, private equity placements, property or commodities, through to financial instruments, banking etc. 

The mutual fund can be structured in such a manner as to value the underlying investment on a periodic basis (daily, weekly, monthly quarterly etc). This provides the family with an organised communication process.

Advantages in Using an Isle of Man Exempt Fund

Ideally, the establishment of a Family Mutual Fund should take place under existing fund regulations, while not over burdening the fund and making the whole process unwieldy.  

An Isle of Man Exempt Fund provides an appropriate vehicle for a private mutual family office fund (either as a partnership, a corporate or a unit trust) and as a means of collecting all of the members together.

Dixcart and the Establishment of an Exempt Fund

Dixcart provides a single point of contact for the establishment and management of a mutual fund, including the formation of the fund vehicle.

Click here for an example illustration of a family mutual fund partnership structure. Dixcart can establish the fund and also organise the formation and management of the underlying asset holding companies (“SPVs”).

Summary

An Isle of Man Exempt Fund is an efficient vehicle for any type of investment for private individuals. It provides an appropriate and flexible means of holding a variety of assets.

An Isle of Man Exempt Fund cannot, be offered to the general public.

Additional Information 

If you require further information regarding Isle of Man Exempt Funds and how they can be used for investing in property and other types of asset, please speak to your usual Dixcart contact or to Simon Kelly at the Dixcart office in the Isle of Man.

 

Dixcart Management (Isle of Man) Limited and Dixcart Global Fund Managers Limited are Licensed by the Isle of Man Financial Services Authority

Categories: Isle of Man, 2017