The following activities relating to the management and administration of a fund must take place at the Foreign Principal Office of the fund, or at another office outside of the United States.
Excerpted from: Custom House Asset Management Limited, Dublin, Ireland:
- All communication with shareholders, including provision of monthly statements of accounts, investment reports, annual financial statements and all other reports, financial or otherwise.
- Communicating with the general public.
- Soliciting sales of shares of or subscriptions into the Fund.
- Accepting and processing subscriptions from shareholders.
- Maintaining both the corporate records and books of account of the Fund.
- Auditing the Fund’s books of account.
- Distributing payment of dividends, fees and expenses, including legal, accounting management and investment advisory fees, as well as payment of salaries and other expenses of the Fund.
- Publishing the Fund’s share prices, whether at the net asset value per share, or the bid (redemption) and offer (subscription) prices.
- Holding board (directors) and shareholders’ (members) meetings.
- Accepting redemption notices from shareholders and effecting the redemption of the Fund’s shares for such shareholders.
Offshore alternatives must be considered by all investors. The stakes are too high. However, most US investors do not consider the concept of offshore banking whereas their European counterparts routinely invest with offshore vehicles. There are many reasons why the US investor doesn’t utilize offshore solutions, but in today’s interconnected financial landscape those reasons are without merit.
What the Ten Commandments Mean for Systematic Traders
The Custom House Asset Management list is the operational compliance framework that establishes genuine offshore character for a fund. These are not suggested best practices. They are the activities that must take place outside the United States for a fund to qualify for the tax and regulatory treatment that offshore structures provide. A fund that performs any of these activities inside the United States while claiming offshore status is not compliant.
The list covers the complete lifecycle of investor relationships: communication, subscription, record-keeping, audit, payment, pricing, governance, and redemption. Every meaningful touchpoint between the fund and its investors must occur at the Foreign Principal Office or another non-US location. This is why offshore fund management requires genuine operational infrastructure at the chosen jurisdiction, not merely a legal registration. The substance of the fund’s activities must be offshore, not just the paperwork.
The Custom House reference to Dublin, Ireland reflects Ireland’s position as one of the most significant fund domiciles in the world, particularly for European UCITS funds and global alternative investment funds. Ireland combines a common law legal system compatible with US fund documentation practices, EU passporting rights for distribution across Europe, a deep pool of experienced fund administrators and auditors, and a regulatory environment under the Central Bank of Ireland that is well understood by global institutional investors. Dublin is the administrative capital of a substantial portion of the world’s offshore fund assets under management.
The observation that European investors routinely use offshore vehicles while US investors largely do not reflects the different historical and regulatory context on each side of the Atlantic. European investors have operated across national boundaries as a matter of course for generations, making offshore fund structures a natural part of the investment landscape. US investors have historically had access to the world’s largest domestic capital market, reducing the incentive to look offshore, and have faced a more aggressive enforcement environment around offshore tax compliance. The interconnected financial landscape of today reduces the practical barriers for US investors who have sufficient capital to make offshore structures worthwhile.
Note: This page presents general background information about offshore fund administration requirements. It is not legal or tax advice. Consult qualified legal and tax professionals before making any decisions about offshore fund structures.
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