The latest from the Paradise Papers – we all have offshore investments
Like the Queen, most of us don’t know precisely – or even vaguely – where our savings are invested. Unlike the Queen, we don’t get to learn about the minute detail of our investments from the front pages of the newspapers.
Yet most of us probably own the same or very similar investments as Her Majesty – just less of them.
This is how it works. Millions of us contribute to Isas, and millions more are building up pensions through work or private investment. We pay monthly premiums into endowment policies and other types of investment plans. We give to charities, some of which is invested.
Those billions of pounds are poured into thousands of different portfolios which, in turn, buy thousands of individual investments – often based all over the globe. There may be additional layers, where a single holding within one portfolio owns many more holdings itself, and so on.
Somewhere, in all that, there’s a high likelihood that we will own a small fraction of a business or fund that is registered – or in technical terms “domiciled” – in a country such as the Cayman Islands, British Virgin Islands or Bermuda.
Two recent trends have increased the likelihood of this being the case. First, investing has become more global. A company selling investment services to British savers is increasingly likely to want to sell them to Americans as well – and places such as the Cayman Islands allow just that.
Second, there has been a huge push among professional investors to put money into new types of asset. In particular, these new investments include private equity funds and hedge funds. Most of these are registered offshore. The investment managers might be in London, but the investments are technically owned by companies in Bermuda.
So how exactly did the Queen get to own shares in a company accused of exploiting the poor?
The Duchy of Lancaster, which oversees the monarch’s assets, put a small fraction of its assets – reported to be under 0.5pc – into a Caymanregistered private equity fund called Dover Street VI. This fund, in turn, put money into another vehicle, which then backed controversial hire-purchase business Brighthouse.
Your pension is almost certainly doing something similar. A mountainous £1.8 trillion is invested on behalf of Britain’s company pension savers, and of this 7pc, or £126bn, is invested in hedge funds, a large proportion of which will have a Cayman registration. Private equity funds – that’s the sort the Queen is invested in – are also commonly registered offshore.
Even mainstream investments, the sorts of funds recommended every day by financial advisers, for example, might be registered in nearer-to-home tax havens such as Jersey or the Isle of Man. Or, if they are not registered there themselves, they will own investments that have links to those havens. Take
Many if not most pension savers will have investments linked to ‘ tax havens’ such as the Cayman Islands, above