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Expat Investor : September 2008
PORTFOLIO MANAGEMENT Top tips for selecting an investment manager Rex Cowley, Director, Close Private Bank, says: “Just because it says Investment Manager on the door does not mean who sits at the desk behind the door is doing a good job. “These tips are simple tests to help screen a manager you may be appointing to look after your wealth.” Track record – There is no better proof of a manager’s ability than track record. With numerous insurance companies, private banks, investment houses and brokers all portraying themselves as investment managers, it is important to pick a provider who can demonstrate that they can consistently deliver returns in all economic conditions. Physical evidence – Saying that you do something and actually doing it are two very different things. Can your prospective investment manager demonstrate that they add value to portfolios through their asset or security selection process? If they cannot, or will not, how can you trust their decision-making ability to the point of placing your own money with them? Support – Make sure your investment manager will look after you by keeping you informed. How else will you know whether or not your investment is delivering in line with your objectives and time lines? You should expect to receive fact sheets, performance updates, regular reporting, and have the ability to speak to the person managing your money. Commitment – Like changing fashions, many investment houses latch on to what is seen as ‘hot’, only to leave their clients in the cold when the next big idea comes along. Make sure that the investment concept or style that you are being sold genuinely lies at the heart of the investment house’s philosophy. If it doesn’t, it probably never will and that could put your portfolio at a disadvantage. Expertise and depth – There is a lot to be said for qualifications and grey hair. In turbulent times will the people managing your wealth be able to keep their cool? It’s always good to know that there is a team of investment specialists looking after your portfolio and that they have a good mix of age, experience, skills and qualifications. Regulated and insured – What if it all goes wrong? Will you get your money back? Who can you complain to, and what recourse do you have? As a rule of thumb, only work with a regulated and licensed investment management company and preferably one in a well- regulated jurisdiction. Not doing so could lead to personal disaster. FIRST PERSON The ‘credit crunch’, the investment markets and the expatriate Gavin Fraser, Global Sales Director, Ashburton, asks whether the credit crunch and its ramifications for the markets has affected the issues that expatriates must consider and how should they react to talk of financial crisis at home. Top tips for managing investment risk other words only commit to equities that are unlikely to be needed for the foreseeable future. Boring it may be, but at least safer. Individual investments can go wrong and stockmarket volatility has increased the need for diversification. Portfolios need to be diversified at country, sector and stock levels in order to ensure that an individual investment doesn’t undermine the performance of the whole.We all like the idea of ‘a sure fire bet’ but just like Aintree, there is no such thing. A portfolio should be centred David Bulteel, Investment Director with Rensburg Sheppards, says, “The main risk management tools are time, diversification and quality.” Because of volatility in markets, the most important consideration for an investor is that they shouldn’t need to raise capital when markets are depressed. In round quality and this will usually mean large blue chip well-managed companies where one can see the likelihood of growing profits for the foreseeable future.We call this the core of a portfolio and it’s there to ‘anchor’ a portfolio to the market. Around this, the investor can ‘trade’ satellite stocks which are there to benefit from anomalies in the market and other shorter-term situations. All investment decisions should be made within the context of the world economy. Macroeconomic factors drive sectors and portfolios need to be weighted accordingly. Only after a decision has been made at this level should the investor turn his attention to the individual stocks to be purchased. In summary, if managed properly, investment can be very rewarding but only if structured properly. FAST FACTS Ashburton Close Private Bank 77410 Rensburg Sheppards 77411 Royal Bank of Canada (CI) 77412 Standard Bank 77413 77414 For more information just enter the above numbers on the Reader Reply Service coupon on page 20 or visit www.expatinvestor.com To register for the digital edition, go to In theory, the overriding answer is that the British expatriate should be well insulated from the troubles back home in the United Kingdom and elsewhere. However, what tends to happen is that when a crisis unfolds and panic hits the markets, investors become so concerned that they decide to sit on their hands to see what happens. If they take that approach whilst living or working abroad, they are likely to miss out on investment opportunities. What has been happening in the markets since the turn of the year? We have seen equity prices fall sharply and then rebound based partly on the central banks’ intervention in the US and latterly in the UK, where they have ploughed money into the markets to stimulate liquidity. These moves have given some comfort to investors. Our investment team believe that we are starting to see the first signs of recovery. Equity markets generally bottomed out in mid- 24 EXPAT INVESTOR ? January and in a second correction in mid-March. Sentiment fell to extreme levels of pessimism in March; these are usually associated with market bottoms. This combined with improving market breadth and participation all adds weight to their belief that we should see some sort of bounce in the markets. However, it is right to remain cautious since technically the outlook for equities is not clear cut. Ashburton, for example, is still reticent about committing too aggressively to these markets. Currencies The current crisis has created a volatile market for currencies and in these circumstances expatriates have to be careful. Those based in Europe who are paid in either US dollars or sterling are suffering through the exchange rate because of the strong performance of the euro. Even if your salary is paid in euros, you may be letting your property at home and receiving income from it in sterling. If you September 2008 convert the sterling payments into euros, the value of the sterling payment will have decreased substantially in the last 12 months. We noted the importance of currencies in our first article and the current volatility has certainly highlighted the importance of careful research in respect of currencies. The solution is to look for mechanisms that neutralise the effects of currency fluctuation. Some funds will do this. It might be prudent to turn to investment managers with a track record who can offer advice on currency movement and will try to structure an individual’s investments in a way that might neutralise the effect of currency conversions. Property Property is another important early consideration when moving abroad and in our first article we considered the options for the expatriate who may move to a new location whilst retaining a property expatinvestor.com at home. For many this is the first time that property is a genuine investment opportunity. Some investors may now be concerned by the impact of the ‘credit crunch’ on the property market back home. They may instead turn their attention to property investment opportunities abroad. Property has been a very popular asset class for Gulf nationals for instance. There has been a tendency for the resident population to invest in the local market because prices in the more traditional markets such as London and Paris have been so high. Those living in the Gulf cannot fail to be aware of the enormous commercial and residential property boom that is underway all around them, and therefore investment in bricks and mortar in the region could be considered. But the expatriate needs to consider his financial circumstances and understand that purchasing a property will tie up surplus funds for a number of years. Professional advice It is clear from our review of the investment market that decisions about what to do with hard earned income are never easy. However, it is my view that no investment should be undertaken without professional advice. You need to understand your investment options from a legal, tax and financial perspective, and that may mean talking to more than one finance professional in the region. The effect of the credit crunch has exacerbated the volatility in the markets but it has not diminished the opportunities, and it should not prove a barrier to prudent investment going forward. The solution is to aim for a balanced approach and this can be best achieved through a diversified portfolio of assets which, if managed also for their currency risk, should meet most investors’ objectives. Fast Facts 66460 www.expatinvestor.com September 2008 ? EXPAT INVESTOR 17 4:18 PM Page 4 EXPAT ISSUES Protecting who you are and what you’ve got Exed200809p1.qxd 14/8/08 2:14 PM Page 1 Investor £4.95/ €7.50/US$7.50 £4.95/€7.50/US$7.50 Serving expats for more than 19 years Serving expats for more than 16 yearswww.expatinvestor.com e than 17 years Sept 2008 “There are those that you know you should read, and then there’s the magazine you will read.” In this issue Isle of Man At a time when 69% of people say they prefer shopping on the internet with a credit card because they feel it is safer, Abbey Banking has put different card fraud prevention options to the test and found that, despite the ongoing desire for security, the key thing for customers is ‘no hassle’. Despite the concern about card 6 9 safety, less than one in three (32%) want their bank to give them a The best Manx money tools on offer to expatriates. Get on the money road Essential directions to achieve your wealth ambition. 15 16 24 Who’s got your identity? ID fraud is a subject which isn’t going away, and we explain why. Portfolio management An A-Z of portfolio management that’s both practical and profitable. Credit crunch What the credit crunch means to expatriate financial management. Regulars 10 Offshore funds 11 Investment news 12 Offshore savings 21 Property investments 22 Offshore mortgage market Bringing advisers and investors together Investor Serving expats for more than 17 years £4.95/ €7.50/US$7.50 www.expatinvestor.com A radical new law introduced by Valencia, the provincial government of the popular Spanish resort Costa Blanca, sees half a million British expatriates lose their rights to free healthcare services. The local authorities have introduced the law saying that the council’s coffers can no longer stretch to providing so many with free healthcare. Of the total number of 500,000 Brits now living in this area, most of them are aged over 50, and their healthcare needs place an unmanageable burden on the country’s health provision. This new law is a particular blow to Brits who’ve settled on the Costa Blanca. Just six years ago, Valencia’s government announced it was making free healthcare services available to all expats, not just UK pensioners or Brits working (and therefore paying local taxes). This announcement enticed many British retirees to pack up and move to Spain. At that time, the local government offered the free healthcare service as part of an inducement to Brits to invest in the region’s growing property market. But with the recent, and somewhat unrecoverable, crash in house prices, the healthcare concession has been taken away. Not all British expatriates are affected. The new rule only applies to those Brits who have taken early me&my easy option Enjoy a great rate and easy access. Licensed by the Isle of Man Financial Supervision Commission to conduct Banking Business. For more information from our advertisers or about products featured in Expat Investor enter the Fast Facts number onto the Reader Reply Service coupon on page 20 or go to: expatinvestor.com Fast Facts 77000 retirement and moved to this region. Older retirees, as well as those on long-term incapacity benefit, are not affected. Brits in these categories remain covered under a reciprocal healthcare agreement the UK has with Spain. If you are a British pensioner retired in Spain, you are entitled to free healthcare under an agreement whereby the UK will pay the Spanish government a predetermined sum per pensioner per annum. To ensure your NHS rights travel with you to Spain obtain an E121 formfrom the UK’s Department for Work and Pensions (DWP). Those of you who are living in Spain and under the retirement age can obtain formE106 from the DWP. This is the right document enabling you to UK-funded healthcare services whilst in Spain for a period of 30 months, provided you are up-to-date with your NI and tax contributions. It wasn’t so long ago when British expatriates living in France received a similar shock on the healthcare front. France, which is home to tens of thousands of retired Brits, introduced state healthcare legislation stipulating that non-working/retired expatriates under the age of 65 are no longer eligible for the Couverture Maladie Universelle (CMU). Ageing populations place a strain Typical victims of identity fraud If you are a forty-something male, you are more likely to become a victim of identity theft than any other age range or group. This is the illuminating fact revealed by CIFAS figures (see table) relating to victims of identity theft. Tips on avoiding identity theft Bank accounts Communications 45.15 Plastic cards Insurance There are some basic steps to take to avoid our identities being compromised.Many may seem to be obvious, but it is by dropping our guard that the fraudster ultimately will benefit. ? Always take particular care of your handbag or wallet. Don’t give thieves a chance. Be especially careful with your credit and debit cards. Try not to keep them together or have them all with you at the same time, and never let them out of your sight. Also, avoid carrying documents such as passports unless 4 EXPAT INVESTOR ? Half a million expats who’ve settled in Spain’s Valencia region are told that that the fall in the housing market has had a knock- on effect on their rights to healthcare services. ‘All in one’ / combined (eg mortgage, loan and bank account) products necessary and never keep in the on a country’s social security systems through pension and healthcare costs. A number of countries around the world are now limiting rights of access to their healthcare systems. Foreign residents deemed not to have made adequate financial contributions to the social security coffers are increasingly excluded. Middle Eastern governments seldom use taxes to fund their healthcare systems. Some countries in this region have made it compulsory for their growing expatriate populations to purchase private health insurance.Key expat working locations such as Saudi Arabia and Abu Dhabi have made private health insurance a prerequisite to obtaining employment visas. Abu Dhabi stipulates certain minimum levels of medical cover which must meet standards set by their health authority, the ADHA. Dubai has begun a consultation process along similar lines. By and large, working expatriates can expect their employers to provide some sort of medical and health insurance cover during time spent overseas.However, the cover offered is sometimes inadequate. Check what you’re being offered and pay attention to the benefits listed. For example, suppose you discover the company scheme includes cover for your spouse but does not offer 6.50% eAccess2 Offshore internet banking for expatriates The interest rate quoted is variable, gross and effective from3 July 2008. Monthly interest available at 6.30% gross p.a. (AER 6.49%). This account is only available online to individuals aged 18 or over and is not available to UK residents. Bradford & Bingley International Limited, International eSavings Unit, PO Box 263, Douglas, Isle ofMan IM99 2JJ British Isles. Registered in the Isle of Man No. 052221C. Registered Office: 30 Ridgeway Street, Douglas, Isle of Man, IM1 1TA. Copies of ourmost recently audited accounts are available on request. Bradford& Bingley plc undertakes to discharge the liabilities of Bradford & Bingley International Limited in so far as the latter is unable to discharge them and remains a subsidiary of Bradford & Bingley plc. Under Isle of Man legislation, eligible deposits made with an Isle ofMan office of Bradford & Bingley International Limited are covered by the Depositors Compensation Scheme contained in the Banking Business (Compensation of Depositors) Regulations 1991 (as amended). AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid to the account once a year.This advertisement does not constitute an invitation to make deposits in any jurisdiction to any person towhom it is unlawful tomake such an invitation or offer in such jurisdiction. Interest rates are variable. Your tax position will depend on your personal circumstances and you may wish to seek guidance from your tax adviser. It is the responsibility of the depositor to declare any interest received to their relevant tax authority. EU residents who are subject to retention tax by way of the EU Savings Tax Directive will need to consider the effect of the retention tax that will be applied to their accounts. .. Interest available Annually, Monthly or Deferred . Internet Savings Account Gross/p.a. Minimumbalance only £1,000 .. Great for regular savings Deferred interest for tax planning Apply online now at www.bbi.co.im same bag as your wallet. ? Shred all documents when you dispose of them.These can range from credit card or bank statements to letters from doctors, employers and indeed anything bearing your full name and address or signature. Receipts can also be valuable to a fraudster, so take care to shred these September 2008 Loans 45.84 Mortgages 48.16 Brits lose free healthcare on Costa Blanca of asking more security questions (30.5%) and instead, more internet banking users would like better monitoring of transactions by their bank (40%). Neil Wilson, Director of Financial Crime, at Abbey, confirms, “Finding customer-friendly ways to protect people and their accounts is key. Product Range Average age Asset finance 47.07 too. ? Examine your bank and credit maternity care. And suppose you are hoping to start a family. Maternity cover will be an essential benefit. You will have to top up your existing cover. One way of doing this is by buying maternity care as a stand- alone benefit.However, some insurers will baulk at these so-called ‘stand-alones’ because of the additional costs incurred in their administration. You may have to acquire the sought-after benefit by taking out a whole new policy. A more economical approach would be to negotiate top-up cover with your employer and have the extra benefit you require added to the company scheme. Expats would be wise to brief themselves on those precautionary measures they can take to stay fit and healthy. The UK’s Department of Health provides a free booklet, Health Advice for Travellers. It can be downloaded from the Department’s website at www.dh.gov.uk, which also provides information and updates about disease outbreaks worldwide. The London School of Hygiene and Tropical Medicine runs the Medical Advisory Service for Travellers Abroad (MASTA), which offers advice on a host of health issues, including immunisations and anti-malarial drugs. The service can be accessed online at www.masta.org. card statements carefully. Keep all your receipts until you have checked each one individually against the statements. This will help you to monitor your account. ? Check your credit reference agency file regularly for unfamiliar items and take prompt action if you expatinvestor.com firstname.lastname@example.org June 2005 security device to further protect online transactions. Even less popular was the option Ongoing monitoring is one of the most important factors in preventing card fraud. Abbey is strong in this area and has continued to invest significantly in monitoring over the years.” Anti-fraud initiatives Abbey Banking claims to constantly monitor all its accounts for fraudulent activity, and where suspect transactions are identified, the team contacts the customer on their mobile to ask them to verify that they made the transaction. Abbey used to make the call manually; however the company is currently introducing new technology which will automate the phone call. If a customer does not verify the transaction,an automatic block will be put on the account. Abbey confirms its system is a version of Mastercard Secure Code and ‘Verified by Visa’.When a customer registers for Abbey Secure they get their own passcode, which will be asked for every time they make an online transaction. The passcode does not change.What’s more, Abbey says it monitors the Bank’s ATMmachines to identify unusual activity. The anti-skimming devices on the ATMs won’t allow the ATM to take a cloned card. notified immediately. ? Don’t give your personal details to Average age (male identity fraud victims) 43.27 43.36 47.81 (female Identity fraud victims) 46.60 40.67 46.17 43.14 50.92 46.17 42.68 39.73 43.44 spot anything strange. ? Don’t forget to keep your home secure, and keep your personal documents locked away. Increasingly, it is these documents that are being searched for by burglars rather than TVs and computers. Theft or loss of documents such as your driving licence or passport should be callers, charity collectors or ‘researchers’ in the street. Check whether they are truly who they claim to be before giving them any information. Be just as careful when taking telephone calls. Fraudsters may try to dupe you into believing they are from banks or other companies. If you give them your account and security details they could run up huge debts in your name. ?When buying online – keep your passwords secure at all times and regularly change your passwords. Make sure that you have up-to-date security software, and only use sites that provide secure payments and be sure you know who you are dealing with. ? Avoid online bank or shopping transactions when using public wi-fi zones or shared computers. ? Redirect all post when moving house or business address. EXPAT EXPATEXPAT www.expatinvestor.com To register for Expat Investor digital edition, visit the website at
July August 2008