Hi ,

In this issue of Invest Offshore, I'm going to share with you my notes from a conference I recently attended here in my hometown of Sao Paulo, Brazil. And what you'll find interesting is that Brazil enjoyed inflows of $7B from offshore investment funds in 2011 and only $1.6B to date in 2012. Is this BRIC going broke?

According to research and consultancy firm ETFGI; Global offshore investment hit all-time high with net new asset inflows into global exchange traded funds (ETFs) and exchange traded products (ETPs) of US$188 billion year-to-date through end of the third quarter 2012, or US$18 billion more than the prior record of US$170 billion in 2011.

Plus we have a special section where our advisor in resident breaks down 3 types of funds which are available to offshore investors when they invest from an offshore investment account that we recommend.

Thank you for being a subscriber to the Invest Offshore Newsletter.

Aaron A Day

The 2nd Annual Offshore Investment Funds Summit was hosted by DMS Offshore Investment Services recently in Sao Paulo, Brazil. There were 3 panels that comprised of 4 experts and a moderator.

The first was about selling Brazilian Offshore Funds to the US market (ie, FACTA), the second focused on Europe (ie. AIFMD) and the third a case study about the top Brazilian asset managers sharing their recent experiences in the offshore investment industry.

The conference brought together a group of distinguished offshore professionals from around the world, to discuss the Brazilian offshore investment market. It was very nice meeting these professionals to learn more about the industry and I've learned a lot.

Below, you'll find my notes:

Brazilian Offshore Investment Market

• Inflow of offshore investment into private equity in Brazil for 2011 = $7B.
• Inflow of money for the 3/4 of 2012 (so far) = $1.6B (projected to be $3B FYI 2012).
• The difference between US & Brazil - not all funds in the US are registered.
• In Brazil, all investment funds are registered but in Brazil there are no mutual funds.
• Typical Brazilian asset management fee 1% - 2%. Performance fee 10% - 20%.
• 2 types of US investors in Brazil - Taxable & Tax exempt.
• Tax exempt example is a University or Charitable foundation.
• 50% of investment comes into Brazil through 3 jurisdictions:
  1. Luxembourg
  2. Netherlands
  3. USA

Luxembourg has $2.3 Trillion under management.

• There are investment funds from 70 counties.
• 74% of Funds sold cross-border are Luxembourg registered Funds.
• Luxembourg is perceived to be neutral in Europe.
• French won't buy Italian funds but all EU countries will buy Luxembourg funds.

Ireland has 40% of all global Alternative Investment Funds.

• These are not UCIT registered, or QIFS (Qualified Investment Funds).
• Ireland has $8B of Brazil registered investment fund assets managed in Ireland registered funds.
• Ireland has 70 country investment fund distribution.
• Ireland has 68 Dual Tax Treaty and like Luxembourg is not considered a Tax Haven.

There has been $65B of alternative investment inflow since 2009!

Europe's reaction to Global Financial Crisis was to create AIFMD (alternative investment fund management directive) and provides for Pan-European Passport.

NOTE: New laws and new regulations are affecting the offshore investment industry. If you're an investor who's confused about the growing provisions that are being implemented, our advisor in resident who is regulated, registered and recognized will be able to assist you with your concerns.

A. AIFMD Funds: (16 Trillion is currently invested in AIFMD funds globally) are not available to non-accredited investor or USA person's, when Investing Offshore but they are ALL available when Investing FROM an Offshore Investment Account.

* definition of accredited investor is:
a natural person who has individual net worth, or joint net worth with the person's spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;
a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

B. UCITS: A growing number of investors are including hedge funds and other alternative strategies within their portfolios as a way of providing better portfolio diversification during adverse market conditions, as well as potentially boosting risk-adjusted returns over the long term. However, the recent financial crisis and a number of high profile fraud cases have highlighted challenges associated with the traditional hedge fund structure, particularly the lack of liquidity, transparency and effective regulation.

For retail investors, higher barriers to entry due to minimum investment size can also make gaining exposure to hedge funds difficult. As a result, investors are increasingly turning to regulated open-ended funds, such as those covered by the European Union's UCITS regulations, as a way to gain easier, more liquid, and more transparent exposure to alternative investment strategies.

C. SIF (Specialized Investment Funds): 3 Trillion invested worldwide - The Specialized Investment Fund (SIF) is a regulated, operationally flexible and fiscally efficient multipurpose investment fund regime for an international, institutional and qualified investor base. In comparison with institutional funds created under Part II of the Law of 20 December 2002 on undertakings for collective investment, the SIF is characterized by greater flexibility with regard to the investment policy, broadening of the sphere of investors and a more relaxed regulatory regime.
Tax regime
The SIF will benefit from the exemption from the payment of:

• income tax;
• capital gains tax;
• withholding tax

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