Understanding offshore mutual funds

Common questions

Who determines where funds are registered to be sold?

Similar to in the U.S., where mutual funds are registered on a state-by-state basis, offshore mutual fund families themselves determine which jurisdictions or countries their funds will be registered in and update their registrations to reflect where their funds may be sold. Schwab consumes this registration information through vendors like Morningstar and restricts purchase to clients residing only in those registered jurisdictions. Not every fund family is registered in every country or jurisdiction; the client's country of residence will determine the funds in which they are eligible to invest. Additionally, certain funds may only be available to specific investors such as high-net worth or institutional investors.

Are offshore mutual funds registered in the U.S. under the Investment Company Act of 1940?

Offshore mutual funds are established and registered outside the United States and are not subject to U.S. regulations. Offshore mutual funds are however registered in jurisdictions like Ireland and Luxembourg and are subject to local European Union registration laws and regulations.

Do offshore mutual funds settle next day like U.S. mutual funds?

Offshore mutual funds trade outside the U.S. markets and therefore have differing cut-off times and are subject to delayed trade date execution. Settlement will also be determined by the local markets where the fund is traded and not always conform to U.S. settlement timeframes.

Why am I unable to purchase U.S. registered mutual funds?

The purchase of U.S. mutual funds by non-U.S. residents is restricted in order to comply with U.S. regulations. As a result of this, non-U.S. resident clients may only hold or redeem existing U.S. mutual fund share positions, initial or subsequent purchases are not permitted. Offshore mutual funds were added as a further investment opportunity for our international clients to diversify their portfolios.