2015 was a weak year for the global offshore market. However, there have been clear winners and losers as the dynamics of the offshore markets continue to shift. The recent focus of most Western governments on tackling offshore tax evasion has affected certain traditional offshore centers more heavily, while the so-called mid-shores that combine on- and offshore traits have experienced strong fund inflows in recent years. The key centers for HNW individuals are the US, Singapore, Switzerland, the UK, India, Luxembourg, and Hong Kong, followed by more "traditional" centers such as the Isle of Man and Malta.
After a strong 2014, 2015 was a weak year for the offshore market. Non-resident liquid assets among the 10 largest booking centers for each asset class recorded a growth rate of 1.6% over 2014.
However, performance varied significantly across the four asset classes. Offshore mutual fund holdings, for example, grew strongly, while growth in offshore deposits stagnated.
Pressure exerted by Western governments is diminishing the importance of traditional offshore centers such as the Bahamas and the Cayman Islands.
Mid-shore centers such as Singapore and Hong Kong are rapidly growing in prominence, particularly Hong Kong thanks to its status as a renminbi hub. Yet Singapore remains the booking center of choice among HNW investors in Asia.
HNW individuals across the world hold on average 22.7% of their liquid wealth offshore.
At a global level the US, Switzerland, Singapore, and the UK are the most important booking centers for HNW offshore wealth.
This report draws on our 2015 Global Wealth Managers Survey to analyze the performance of key booking centers over time. It has a particular focus on HNW individuals. In particular it examines the propensity to invest offshore and booking center preferences for 20 key markets.
Specifically the report will help you to:
Understand which are the largest offshore centers and how this breaks down by asset class
Compare the performance of the offshore centers and what is driving this performance
Understand how much wealth HNW individuals hold offshore and how this varies by country
Understand what the preferred centers for HNW offshore investments are and how this varies by country
Understand how to best promote your offshore proposition.
Understand HNW investors booking center preferences and how this is expected to change.
Learn how different offshore centers have performed in recent years and adjust your offshore proposition accordingly.
Table of Contents
Offshore market growth slowed in 2015
Critical success factors
THE GLOBAL OFFSHORE MARKET IN CONTEXT
Offshore market growth has been slowing down
The total size of the offshore market across the 10 largest offshore centers reached $56.7tn in 2015
Non-resident deposit holdings have been muted
Non-resident mutual fund holdings recorded a CAGR of 9.9% between 2011 and 2015
2015 was a weak year for non-resident equity holdings
Non-resident bond holdings growth was also subdued in 2015
Safe havens and the mid-shores are rising in prominence at the expense of traditional offshore destinations
The largest offshore centers are OECD countries, not small tropical islands
Pressure from Western governments is diminishing the importance of traditional offshore centers
The so-called mid-shores have experienced strong fund inflows in recent years, but Singapore is slowing down
The performance of traditional safe havens has varied greatly across asset classes
Retail non-resident deposit holdings performed poorly in Europe in 2015
BOOKING CENTER PREFERENCES OF HNW INDIVIDUALS
HNW individuals are an important part of the global offshore market
HNW individuals across the world hold on average 22.7% of their wealth offshore
The propensity for HNW offshore investment varies greatly by country
At a global level, the US is the preferred booking center for HNW wealth
The US, Switzerland, and Singapore are the most important offshore destinations for HNW individuals
HNW booking center preferences vary significantly depending on nationality
HNW individuals in the Americas make use of a range of booking centers for different reasons
Expatriate flows are an important determinant for booking center preferences among US and Canadian HNW individuals
Brazilian HNW individuals predominately invest in the US
HNW investors in Asia Pacific are less geographically diversified than in the past
HNW investors in Asia Pacific are increasingly considering wealth hubs close to home
Southeast Asia tends to book much of its wealth in Singapore
Australian HNW individuals make use of regional booking centers and the UK and the US
Chinese HNW investors invest in safe havens
European HNW individuals tend to invest close to home
German HNW individuals invest predominantly in Switzerland and the UK, but this is about to change
Shared borders and a common language are also important considerations among French HNW investors
The Isle of Man is the preferred offshore destination among UK HNW investors
Russian HNW individuals prefer well-established offshore centers, after suffering steep losses following Cyprus's bailout
HNW individuals in the Middle East and Africa predominately invest in their country of origin, Switzerland, and the UK
The UAE's sizable expat population maintains strong financial links with their countries of origin
Abbreviations and acronyms
Double taxation convention (DTC)
High net worth
Exchange of information
Tax Information Exchange Agreements
Verdict Financial's 2015 Global Wealth Managers Survey
Verdict Financial's 2014 Global Wealth Managers Survey
About Verdict Financial
List of Tables
Table 1: Non-resident retail holdings in Switzerland, 2006?15
Table 2: Non-resident retail deposits and mutual funds in Hong Kong and Singapore, 2010?15
Table 3: Top 10 non-resident deposit holdings in the largest booking centers ($bn), 2010-15
Table 4: Top 10 non-resident bond holdings in the largest booking centers ($bn), 2010-15
Table 5: Top 10 non-resident mutual fund holdings in the largest booking centers ($bn), 2010-15
Table 6: Top 10 non-resident equity holdings in the largest booking centers ($bn), 2010-15
List of Figures
Figure 1: Offshore market growth slowed down in 2015
Figure 2: Non-resident deposits among the top 10 offshore centers have performed weakly over the past few years
Figure 3: Non-resident mutual funds have performed strongly in recent years
Figure 4: Non-resident equity holdings growth stagnated in 2015
Figure 5: Non-resident bond holdings rose by a mere 1.5% in 2015
Figure 6: The US attracts a large proportion of non-resident funds
Figure 7: Traditional offshore centers have struggled to perform
Figure 8: Non-resident deposits in the Bahamas have declined over the past two years
Figure 9: Wealth managers in Hong Kong and Singapore agree that funds are incoming due to the scrutiny that other traditional offshore centers have
Figure 10: The US remains the largest offshore market, but growth can be found in Japan
Figure 11: A bearish market performance saw US non-resident retail holdings contract
Figure 12: In 2015, non-resident deposit growth slowed in Europe
Figure 13: The tendency to allocate money offshore varies greatly among countries
Figure 14: The US is the preferred booking center for HNW wealth
Figure 15: Booking center preferences vary greater depending on HNW investors' backgrounds
Figure 16: US HNW individuals tend to book their wealth in their former country of residence
Figure 17: The economic bailout in 2013 hit Cyprus's offshore deposits market hard
Figure 18: Investec provides non-resident mortgages to South African HNW investors
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