2015 was a particularly weak year for the global offshore market, with a significant drop in the number of high net worth (HNW) investors moving capital offshore, according to a report by financial analysts Verdict Financial.
However, there have been clear winners and losers as the dynamics of the offshore markets continue to shift, the company said in a statement. The recent focus of most western governments on tackling offshore tax evasion has affected certain traditional offshore centres more heavily, while the so-called mid-shores that combine on- and offshore traits have experienced strong fund inflows in recent years.
Verdict Financial said that the key centres for HNW individuals are the US, Singapore, Switzerland, the UK, India, Luxembourg, and Hong Kong, followed by more “traditional” centres such as the Isle of Man and Malta.
Verdict Financial’ s HNW Offshore Investment: Booking Centre Preferences 2016, latest report found that safe havens, such as the US and Switzerland, are rising in prominence, while more traditional offshore destinations, such as the Bahamas, are experiencing declines in offshore assets.
‘Offshore centre USPs’
Heike van den Hoevel, senior analyst at Verdict Financial, said: “Understanding the unique selling points of each offshore centre is key to determine not only their performance, but also future prospects, and the reasons why investors will want to invest there.”
“For example, the Bahamas, which is mainly known as a tax haven, has struggled in recent years. In light of recent scandals, in particular the Panama Papers, as well as increased media attention on tax evasion, investors and wealth managers are turning away from traditional offshore centers to avoid being tainted by association.
“Switzerland, one of the world’s largest safe havens, represents another interesting example. Traditionally known for banking secrecy and numbered accounts, the Alpine state felt the full brunt of the increased pressure on offshore centers after the 2008 crisis, and retail non-resident deposits declined by 24% between 2008 and 2013,” he said.
Swiss tide turning
Despite the drop the report highlights that in Switzerland “the tide is turning” as the Swiss government has made efforts to increase transparency and end bank secrecy in recent years, most notably committing to the automatic exchange of tax information as part of the OECD’s Common Reporting Standard, which will begin in 2018.
Van den Hoevel continued: “These efforts combined with the country’s safe haven status have seen non-resident deposits return in recent years. Various international developments – including Britain leaving the EU, the coup in Turkey, continuous unrest in the Middle East, slowing economic growth in China, and uncertainties surrounding Russia’s geopolitical ambitions – have all contributed to funds flowing back into Switzerland as investors seek a safe haven for their money.”