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Getting personal with portfolio bonds

PHUKET: The strengthening US dollar vis-à-vis most global currencies – especially in Asia – has made many expatriates begin to question the strategy of investing in the country where they live. It is not only the currency risk which concerns people, but also the fact that some countries have begun taking protectionist measures to restrict the outflow of capital from their economies.


Phuket Expat Finance

Sunday 19 February 2017, 11:00AM

Take the befuddlement out of choosing the right diversity of investment options with personal portfolio bonds (PPBs). Photo: AFP
Take the befuddlement out of choosing the right diversity of investment options with personal portfolio bonds (PPBs). Photo: AFP

Such exchange controls became common place after the Asia Crisis in 1997, but had been relaxed or removed entirely for the better part of the past decade. This liberalisation appears to be ending, with individuals – and even businesses – now finding it increasing difficult to move money abroad. For expatriates, this potentially a very troubling development, and anyone who has not already explored alternative jurisdictions and investment structures for their hard-earned money should begin thinking seriously about it.

Personal portfolio bonds (PPBs) are flexible means of investing over the medium to long term. They are designed to allow your capital to grow over time, while offering you the option to add to your investment as when you choose. In addition, you may choose to take ad hoc withdrawals at any time, if necessary, or regular withdrawals (read “income”) if you have opted to utilise the structure to hold your pension or retirement fund.

A PPB is not itself an investment, rather it is an “open architecture” platform that allows you to access a broad range of investments from the most well-respected investment institutions around the world. Further, you can invest in virtually any market-traded security around the world, including direct equities (stocks), mutual funds, bonds, SICAVS, gilts, precious metals and specialty funds. Typically limited to institutional or accredited investors, some of the world’s best investment managers are accessible to retail clients only through a platform such as a PPB. In addition, the minimum investment levels and institutional discounts you receive are normally reserved solely for major banks or other large financial institutions.

Because you can access truly global investments, you may also choose to hold them in a variety of currencies. Given the exchange controls mentioned above – and events such as Brexit, which is weakening the pound – the option to hold multiple currencies may prove to be very appealing over the long term.

A PPB can also be used to protect your assets, and to reduce the tax burden you may otherwise face when it comes time to begin drawing on your capital. And because PPBs are located in offshore jurisdictions, your portfolio can be added to, and is accessible in, virtually any country you decide to call home. If you choose not to return home, tax on investment withdrawals or pensions normally due to your home country may be mitigated by using a PPB. And if you do once again become a tax resident of your home country, the structure may even continue to offer you tax benefits upon your return (depending on the country).

One major reason portfolio bonds are so popular is their use as a generation and estate planning vehicle. If you hold an array of investments, including property, around the world, major problems can arise upon your death. Not only would your spouse have to cope with their grief, but they would also have to contend with the daunting task of hiring a lawyer in every single jurisdiction in which the assets are held, in order to settle the estate and assist with probate procedures.

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Probate is also an extremely time-consuming and expensive exercise because lawyers obviously do not work for free. Most people are simply not aware of the problems that their loved ones may face when they die, and many of these issues can be remedied quite easily by holding their investment assets within a portfolio bond. Provided beneficiaries have been nominated, it is possible through a PPB to mitigate not only probate, but depending on your nationality and country of residence, death duties or inheritance taxes, as well.

The administrative simplicity of a PPB is also very appealing. Current international regulations on Anti-Money Laundering can make brokerage accounts, and even bank accounts, extremely cumbersome to deal with. Moving money or making trades can mean filling out AML and FATCA paperwork, and may even result in a mandatory visit to your financial institution.

While the same regulations apply to a PPB to material changes to your account (such as paying in additional money, change of residential address, cash withdrawals), buying and selling of investments within your account requires no additional AML procedures – regardless of the quantity of shares/funds you are trading – because all transactions are implemented by the PPB provider on the your behalf.

The benefits and the investment possibilities within a personal portfolio bond are quite simply too numerous to mention, and it could be said that it is probably the most sophisticated and cost-effective investment structure available anywhere in the world today, and worth considering for any expatriate.


For more expert explanations of all things financial, email chatwithus@phuketexpafinance



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