Wednesday, April 18, 2007

You only sing when you're winning. - EU posturing over tax issues

Tax competition between Switzerland and the EU has raised its head once more with scare mongering to Switzerland that a political waste land of no influence and economic isolation will be inevitable if Switzerland does not join the EU.

In reality its all about Switzerland being better at the tax game....

EU Commission President José Manuel Barroso has called on the Swiss government to do more in the ongoing spat over low corporate taxes in Switzerland. He also said that while no pressure was being put on Switzerland to join the European Union, an isolated country had no political influence and no future in an age of globalisation.

Having just paid $800 million dollars to the EU when they didn't really have to, I would have thought that the EU Minister would have a little more respect for Switzerland.

Barroso continued "...a country all on its own would be "lost" when it came to economic competition and its political influence would be reduced to zero. Regarding Switzerland, Barroso said the country was "more involved" in the European Union than some member states – "and also more dependent on Europe", he added with a smile.

And there we have the second veiled threat in the last six months from Europe. The first one was a minister saying that "we are not looking at sanctions at this stage" with regard to the tax issue.

The European union is based on the pretence that the individual nations are better off as a 'collective' and the power and free movement within that collective brings all the members a better level of economic and social success.

I have lived in several EU countries and now live in Switzerland and have experienced, first hand, the EU's affect on the citizens of member states. Most are annoyed with education, health services, security, immigration, but worst most feel powerless to do anything about it. Can the UK actually call the last elections legitimate when only 30 odd per cent of the population voted? The biggest reason given by non voters was "it won't make any difference". That's because in countries like the UK, I am afraid, it doesn't.

No referendums on European policy. There was not going to be a referendum on the constitution and when it comes around again, and it will, there will not be one then. Politics in the UK and Europe are about rail roading the masses with gimmicks and spin, while taxing the country to death. On an average £100 spent in the UK only £23 worth of goods and services are bought, the rest is tax...

So why would a country like Switzerland (where my kids can walk to school without fear, where I do not worry where I park my car and where, even as a foreigner, I get to vote on everything that affects my life from state insurance companies to government spending) want to take on the policies of Europe and become just another country and peoples to be pushed around at the will of faceless bureaucrats?

"Democracy" is an oft touted word in European circles and is something that is waved around like a European Standard, but if EU citizens would really like to know what democracy is and how it works very, very well then you should visit Switzerland.

If the price of safety, security and piece of mind is the fact that a few companies and fat cats can pay less tax being here than being in any other EU country, I can live with that.

Oh and Mr Barroso "a country on its own will be lost, when it comes to economic competition" isn't that what the argument is about, 'Tax' competition? Just because Switzerland are winning doesn't mean the EU can change the rules...

As my son would say..... Dad "Don't hate the player, hate the game"...

Wednesday, April 04, 2007

Tax Exiles Flock To Switzerland

By Swiss Info

Ultra-rich foreigners are flocking to Switzerland in increasing numbers to take advantage of controversial lump sum tax arrangements offered by many cantons.

The number of tax exiles reached 4,175 last year up from 2,394 in 2003, according to a survey by consultancy group KPMG. The policy has attracted critics both within and outside the country.

Earlier this year a spokesman for French Socialist presidential candidate Ségolène Royal accused Switzerland of "banditry" after Johnny Hallyday, a French rock star, announced he would switch residency for tax purposes.

Hallyday will join a growing list of multi-millionaire celebrities and business leaders moving to Switzerland, including musicians Tina Turner and Phil Collins, former Formula One driver Michael Schumacher and Ikea founder Ingvar Kamprad.

Swiss tabloid newspaper Blick questioned why Hallyday would pay SFr300,000 ($246,000) in taxes by special arrangement while Swiss tennis ace Roger Federer has to pay SFr3 million – despite both earning around SFr10 million.

Such rich foreigners avoid paying tax on their total wealth and usually contribute a lump sum based on five times the rental value of their Swiss property instead.

However, KPMG partner Patrick Burgy disputed the popular belief that wealthy foreigners do not contribute to Swiss society.

KPMG estimates that Swiss tax coffers benefited to the tune of up to SFr600 million in 2004, a figure that probably nudged SFr1 billion last year also accounting for social security payments and tax revenues on interest earned in Swiss banks.

Challenging perceptions

"The general perception is that lump sum tax payers have too good a deal and are not paying their fair share," Burgy told swissinfo.

"But our calculations show that these people are paying the same amount on average as the average Swiss tax payer who earns more than SFr200,000.

"What people also forget is that any income they derive from foreign sources, such as a concert staged in Japan, is also subject to withholding tax in that country. So the lump sum payment in Switzerland is often only half the story."

KPMG also revealed that wealthy foreigners in canton Valais in western Switzerland contribute 5.2 per cent of the total tax collection despite making up only 0.6 per cent of the local population. In six of Switzerland's 26 cantons, rich foreigners contributed at least two per cent to the local tax purse in 2004.

But this argument does not wash with the centre-left Social Democrat Party, which is campaigning to bring a halt to the practice.

"We are against lump sum taxation because it is not just and is in breach of the constitution. According to the constitution all citizens should be treated equally and taxed according to their ability to pay," Social Democrat spokeswoman Claudine Godat told swissinfo.

"We are not sure if the figures in the [KPMG] report are accurate [regarding the numbers of lump sum payers]. But if they are correct, then it is indeed worrying."

Tuesday, April 03, 2007

UK Private Investors to access hedge funds?

Article by Hedgeweek

UK asset management firms and hedge fund industry representatives have expressed their satisfaction with the long-awaited proposals unveiled by the Financial Services Authority that would allow retail consumers to invest in funds of hedge funds and other alternative investments sold by firms authorised in the UK.

The new regime for retail alternative funds is likely to come into force early in 2008, following formal consultation with alternative asset managers and other members of the industry. The UK regulator is asking interested parties to comment on the proposals by June 27, before it finalises the draft rules toward the end of this year.

'We welcome this development,' says Gordon McAra, head of communications at the Alternative Investment Management Association. 'The FSA's proposals seem proportionate and sensible, and we are happy to see them.'

The FSA notes that retail investors in the UK are already able to obtain access to hedge funds and other alternative products in a variety of ways, including structured products and exchange-listed investment companies.

The regulator says it now believes the time is right to allow the development of retail-oriented funds of alternative investment funds within its regulatory regime, following a widespread welcome from the financial industry when the idea was first officially floated just over a year ago.

Says Peter Grimmett, head of distribution compliance at Threadneedle: 'As a manager of hedge funds, we welcome the FSA proposals to widen hedge fund availability to retail consumers in a controlled manner.

'This is a good step in the right direction, as it's important that the UK remains competitive with other countries, such as Germany, France and Spain, which have permitted similar regimes. The FSA has acknowledged that there is general international acceptance of such alternative investment funds - we concur with this.

'However, to make this work, it is critical that the right tax regime is in place and it is helpful to know that the FSA has worked closely with HM Treasury and HM Revenue & Customs on taxation issues.'

Jamie Murray, global head of institutional business development at HSBC Alternative Investments, says: 'Considering making funds of hedge funds available to retail investors is excellent news. This will bring the UK in line with a range of different European countries, including France, Ireland, Spain and Switzerland, which have already opened their markets to retail and high net worth investors.

'We firmly believe that a properly constructed and well-diversified fund of hedge funds is the most appropriate way for investors to access this sector. There are more than 9,000 hedge funds available worldwide, making it impossible for the average retail investor to research individual funds. Investing in a fund of hedge funds run by an experienced manager, with the resources to undertake extensive, ongoing research is a sensible solution to this problem.

'While fund of hedge funds are available via the London listed route already, the closed-ended nature of these types of vehicle is not suitable for all investors. The concept of funds of alternative investment funds may provide a good solution for this kind of investor.'

Noting that HSBC Private Bank has been advising private clients on hedge fund investment since 1989, Murray adds: 'We have observed the hedge fund industry evolve and acceptance for this investment approach spread very widely. The acceptance of the approach for UK retail investors will provide an additional investment tool, providing these investors with diversification benefits and access to a group of investment specialists able to generate much sought-after alpha, as well good risk-adjusted returns.'

The new FSA document reflects feedback from the publication last March of a discussion paper, Wider Range of Retail Investment Products: Consumer Protection in a Rapidly Changing World, which considered the increasing variety of retail investment products, the risks they posed to consumers, and how those risks could be addressed.

Providing a regulatory framework for alternative asset funds of funds, the FSA believes, would deliver substantial structural and operational safeguards for investors, including the requirement to have an independent depositary, strict rules on independent valuation of underlying assets, and timely redemption of investments.

Dan Waters, the FSA's director of retail policy and asset management sector leader, says: 'Asset management is a dynamic and innovative industry, and we believe it is important that consumers can get access to the latest techniques to manage their own savings and investments.

'We think the time is right to permit access to a wider range of innovative strategies through authorised onshore vehicles. This will allow investors more choice and a better opportunity for risk diversification, while maintaining investor protection through our rules on the operation of the product.'

A key element in the FSA's approach is its expectation that the fund manager will operate with due diligence. The consultation paper sets out the regulator's requirements in a more principles-based way, and proposes guidance for the fund manager in areas the FSA considers necessary when making and holding significant investments into unregulated schemes.

The paper is accompanied by a case study illustrating the respective responsibilities of providers and distributors of alternative fund of funds products.

The FSA proposals would introduce retail-oriented funds of alternative investment funds into the existing FSA regulatory regime for non-Ucits retail schemes. At the same time, the existing 20 per cent restriction on investment into unregulated collective investment schemes would be listed for non-Ucits retail schemes that are funds of alternative investment funds.

Under the proposals, managers of retail funds of alternative investment funds would be subject to due diligence guidance on factors to consider in making their initial and ongoing investment decisions.

The regulatory regime would remain essentially unchanged for existing non-Ucits retail schemes, subject to various amendments required to ensure overall consistency for the regime as a whole. The changes would also ensure that the regime for qualified investor schemes was in line with the revised approach for non-Ucits retail schemes.

Aima views the proposals as an endorsement of the long-held view of members that retail investors should be able to benefit from access to new opportunities for risk diversification and portfolio growth. The association also welcomes the operational safeguards that the FSA will require to ensure that investor protection is on a par with other authorised investments.

Matthew Jones, manager of Aima's regulatory department, says: 'There is a common goal shared by the industry and the FSA to optimise the investment environment for investors, and we believe this is a positive step forward.

'The FSA is right to conclude that retail investors should be given the opportunity to invest in market-leading investment products that can deliver absolute return performance in all markets, giving a better opportunity for risk diversification.

'However, as the FSA found with its QIS regime some time ago, the be all and end all for these products is the question of how they will be taxed. We are pleased to read that the FSA is confident that an appropriate taxation regime will be developed by HM Treasury, in discussion with the FSA.'

The FSA says that following the closure of the consultation period on June 27, it will finalise the draft rules in light of the responses it has received and publish a policy statement toward the end of the year, giving feedback, setting out the rule changes and announcing the date on which they will come into effect.

Monday, April 02, 2007

Affluent investors confused by hedge funds?

The article below discussing the lack of understanding of alternative investments by affluent investors is an interesting one. For all the billions and billions that are invested in hedge funds you would have thought that some of this money would have been spent on marketing.

A search on Yahoo for 'hedge fund' will bring up as number one, a hedge fund portal i.e hedge fund news. On the firt page of Yahoo, there is not one hedge fund. Same with Google, no actual hedge funds, just news sites, portals and blogs.

The thing is, isn't this the point? It appears to me that the hedge fund industry, if it is to attract the 'affluent' private investors (as oppossed to the institutional investors that dominate)then the mistique that the hedge fund industry creates by not being very good at marketing, is the very thing that will appeal to these investors?

However, taking the article below on board, we will be explaining the new Managed IPO and PIPE account shortly, just iron out a few wrinkles on the web site in an attempt to get our marketing right!!

Here is the article from PRNewswire

CHICAGO, March 28 /PRNewswire/ -- Even with all the recent media attention, hedge funds and other alternative investments remain little understood by affluent investors.

Just 18% of affluent investors, defined as having more than $500,000 in investable assets, say they understand hedge funds. Structured products are understood by only 15% of these investors and private placements come in at 19%, according to a new Spectrem Perspective(TM) report, "Alternative Investments: Are They a Priority for Affluent Portfolios?" released today.

At the same time, just 9% of affluent investors say they are interested in hedge funds. A similar 9% express interest in structured products, with 10% interested in venture capital, 11% in private placements and 11% in futures.

"While hedge funds have been in the news like no other financial product recently, affluent investors still don't feel they understand these alternative investments. This gap in understanding corresponds with a distinct lack of interest in hedge funds and other alternative investments such as structured products and private placements. Financial services providers offering these products need to be proactive in educating affluent investors about their risks and rewards. Given their lack of interest, it seems unlikely these investors will step forward themselves seeking more information," said Catherine S. McBreen, Managing Director of
Spectrem Group.

When asked which of five specific alternative products were the riskiest, affluent investors selected hedge funds (39%), followed by commodities (32%), precious metals (14%), private equity (8%) and REITS (7%).

The Spectrem Perspective(TM) report, "Alternative Investments: Are They a Priority for Affluent Portfolios?" is based on telephone interviews conducted in late 2006 with 514 affluent households, defined as those with more than $500,000 of investable assets. The margin of error is plus or minus 4.3 percentage points.