The IMA’s criteria for offshore funds

Compared with UK-domiciled funds, which have assets under management of £726bn, offshore funds registered for sale to UK investors and reporting data to the IMA, are significantly smaller with just £56bn of funds under management.

Offshore funds are taxed differently to UK funds and are subject to a different investor protection regime but they offer investors additional choice of funds and the opportunity to diversify their investment portfolios further.

Offshore fund submissions into the IMA sectors were initially restricted to three scheduled time periods in order to gauge industry appetite. The first tranche of submissions in 2009 resulted in 141 classifications followed by 156 from the second and third tranches in 2010.

Since 2011, a further 174 offshore funds have been classified and firms have been able to make submissions on an ad hoc basis.

In total, there are 482 offshore funds in the IMA sectors at the time of writing, compared with almost 2,500 UK-domiciled funds. The funds are spread across a range of IMA sectors but the Specialist, Global Bonds and Global sectors are the most popular.

In order to be considered for inclusion into the IMA sectors:

• The offshore fund provider needs to specify which share class of the offshore fund is the most relevant for a UK investor, for example using the sterling share class. The IMA only allows one share class of the fund to be classified to eliminate proliferation of share classes of the same fund in the sectors.

• The nominated share class must have reporting fund status. This requires the fund to report 100 per cent of its profits annually, some or all of which may be paid out. UK investors need this information to pay the correct amount of tax.

• The offshore fund must be a Ucits – domiciled in the EU, authorised in their home country and comply with European product legislations and registered for sale in the UK.

Nicola Kembey is head of sectors at the IMA