Mutual Funds

A mutual fund is an open-end investment company combining and investing the money of thousands of people in various securities in order to achieve a specific objective over time.

This type of funds offers many benefits, e.g. portfolio diversification, the possibility of buying back its shares at the current net asset value.

Various features that properly structured international financial services funds offer distinguish them from traditional mutual funds. These are the distinguishing features of the funds:

  • Because of a lower level of regulation it is easier to establish and administer the funds.

Accordingly, this significantly reduces formation and operating costs. This means that funds can be offered at zero or low load and that management fees are competitive from the investor´s point of view. Also, greater flexibility is available, when talkiing both about fund structure and the investment portfolio.

  • Tax exempt status enables the fund to reinvest the amount of taxes on profits and gains. If not having this status in an offshore jurisdiction, this amount would be paid in high tax jurisdictions. To determine any potential tax liability, tax advice in the jurisdictions of the sponsor/manager and each investor is needed.
  • As all administration, execution and shareholder relations can be subcontracted out, no large back office operation is required. Then, by having clients invest in a fund rather than some discretionary managed account, it is possible to do without all of the contract notes, advices, statements and other client transaction paperwork.
  • Mutual funds are distinguished by a greater degree of liquidity than most types of investments. Usually investors may redeem their shares on any business day at the current Net Asset Value that can be more or less than the original purchase price.
  • Shareholders can reinvest fund dividends and capital gains distributions, which allows the fund to purchase additional shares without any sales charge.

Belize Mutual Funds are regulated by Mutual Funds Act (chapter 268) enacted in 1999.

When setting up a mutual fund, some tasks must be completed. When setting up a mutual fund in an international financial services jurisdiction, the following schedule must be followed:

  • preparing the investment plan;
  • deciding on the Structure of the mutual fund;
  • drafting the prospectus;
  • drafting the mutual fund charter;
  • drafting agreements with professionals;
  • appointing bankers, custodian and auditors;
  • forming fund equity (shares);
  • making regulatory filings and approvals;
  • distributing and marketing the prospectus.