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By: Simon Danaher

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October 9th, 2015

Toxic funds laying waste to expat investing

Featured | Financial Education

[Estimated time to read: 3.5 minutes]

Why you should review your portfolio, now!

Itoxic investments and expat investingnvestments now banned in the UK are blighting the portfolios of thousands of expatriate investors – and you could be one of them without even knowing.

At the beginning of January 2014, the Financial Services Authority (the UK’s financial regulator, now called the FCA) banned the sale of Unregulated Collective Investment Schemes to ordinary investors. The ban followed warnings in which the watchdog repeatedly highlighted the risks these funds can pose to investors’ portfolios.

These warnings were echoed by many professional wealth managers who were sick of seeing the damage caused to investors by the unscrupulous salesmen that peddled these funds.

In a report published by the FSA in 2012, the regulator estimated that as much as £4bn had been put into UCIS products by around 85,000 unlucky investors – although many believe the figure was far higher.

When the ban was enforced in the UK, many of those who sold these products began to look elsewhere for their next victims and these SHARKS BEGAN TO HUNT IN FOREIGN WATERS.

UCIS funds are most commonly found overseas within offshore insurance bonds from product providers such as Old Mutual International (formerly Royal Skandia and Skandia International), Generali International, Friends Provident International, Hansard International and other household names.  This is because these tax wrappers can easily be misused by salespeople to extract vast sums of hidden commission from your money.

Since 2014, we estimate expatriate investors have ploughed up to £1 billion into these schemes and possibly much, much more.

Why should I be worried?

The problem with UCIS schemes – and any funds which invest in esoteric and specialised assets – is they can lead to disaster. Our research has found that around $6 billion is currently trapped in a range of unregulated or specialised funds, with investors unable to access cash.

What’s worse is that, in many cases, the investors have been told they will only be returned a small percentage of what they originally invested and often after many years of waiting. Inside our free special report, we reveal a number of these funds.

If you suspect you are in a fund which could cause you trouble or would simply like to know more about the risk to your whole investment portfolio – download our free report using the form below.

Here are some common characteristics of UCIS and other specialised funds – for the full list, download our free report:

  • Promise of “very high or guaranteed returns, sometimes in double figures. This is the hook designed to get you interested.

  • “Non-correlation” to other markets – that is, claims to continue to perform when other markets, like equities, aren’t. This doesn’t mean they are necessarily lower risk – it can mean the opposite.

  • Mark to model pricing. This means that past and “projected” returns may appear as nearly a straight line (or in “steps”) on sales material. This is always a very BAD SIGN.

  • High fees and opaque charging structure. Unregulated products are usually expensive. Annual management CHARGES IN EXCESS OF 4% or 5%, COULD SPELL TROUBLE.

  • Poor liquidity. Many decent funds now offer daily or at least weekly trading. If you try to get your money out and are told you will need to wait longer this is A BIG RED FLAG.

  • Lock in periods. UCIS funds are normally back-end loaded (often called a 5, 4, 3, 2, 1 EARLY EXIT PENALTY). This means you lose 5% of your money in a penalty charge if you need to get back your own money in year one and still pay a 1% charge if you need access after five years.  Not having access to you own money isn’t in your interest, and these early exit penalties are expensive and punitive.

By downloading this free special report, you will find out exactly what these toxic investments are and will be told how to identify any problems within your own investment portfolio.

You will also qualify for the limited opportunity to claim a complimentary X-ray analysis of your existing situation for up to 72 hours after you have downloaded the report. This is a £750 saving on the normal cost.

About Simon Danaher

Simon Danaher previously worked for AES International, in marketing and communications.