Offshore Bond Portfolios

Introduction

Tideway Asset Management creates portfolios of hybrid capital fixed income securities issued by large, household name companies with a view to generate 5% p.a., net of fees distributable income without capital erosion.

Offshore Bonds

Offshore bonds have been used as an HMRC approved tax wrapper for many years to shelter and defer income tax.

The offshore bond provides 5% annual withdrawal allowance equivalent to 8.33% gross (40% taxpayer) or 9.09% gross (45% taxpayer). This allowance will last for 20 years, at which point it is deemed that all the original capital has been withdrawn.

Any unused allowance can be used in later years - For example if a policyholder only needed 2.5% pa withdrawals to satisfy their needs it would last them for 40 years (NB. after which any further withdrawals would be assessed for tax).

Investment Portfolio

Historically Offshore Bond portfolios have been made up of collectives in order to comply with HMRC permitted assets rules. This restriction allowed Offshore Bond providers to mitigate the risk of assets being bought that did not comply with HMRC rules.

Using Direct Assets

In recent years however, a number of Offshore Bond providers have introduced a new investment option that allows discretionary portfolio managers to invest in direct assets such as equities and bonds within an Offshore Bond.

The benefits of investing in direct assets include:

  1. The ability to create a bespoke portfolio that is tailored to meet a specific client need. For example the yield, credit quality and range of maturities within a bond portfolio can be varied depending on the risk appetite, income requirement and time horizon of the investor.
  2. The total charges for the portfolio can be reduced by removing underlying fund costs

Tideway Asset Management

Tideway Asset Management's primary objective is to deliver secure income ahead of inflation after all fees whilst limiting the risk of capital loss. Tideway’s core investment focus is in fixed income credit and specifically in hybrid capital.

We focus on certainty of returns and avoid forecast-driven or momentum-based investing. We employ a robust research-driven investment process to identify assets with good risk-return profiles and the capacity to generate consistent income. Tideway runs concentrated, high conviction portfolios which do not replicate or track indexes.

Hybrid Capital

Hybrid capital is a form of capital that falls between debt and equity. The features of each specific hybrid defines where it sits on the debt/equity spectrum.

Hybrid capital is an ideal asset to hold in an offshore bond as all income will be compounded with no deduction of income tax.

Hybrid capital offers

  • A higher return than ordinary debt
  • Higher cash flow than common equity dividends
  • A return typically well ahead of inflation
  • Less volatility than equity investing
  • More certainty of future capital value than equity
  • Exposure to large, household name, investment grade companies
  • Investment in companies with long track records of meeting all obligation

Hybrid Capital Portfolio

Find out more about Hybrid Capital on our Tideway Asset Management website Opens in a new window

Tideway Investment Partners LLP
is authorised and regulated by the
Financial Conduct Authority.
FCA number 496214.

Contact
Tideway Investment Partners LLP
Thomas House
84 Eccleston Square
London SW1V 1PX
+44 (0)20 3143 6100
info@tidewayinvestment.co.uk