Literally, offshore means off or away from the shore. In the case of mutual funds, offshore translates as organized, administered or domiciled outside the United States in a tax-friendly jurisdiction; these locations may be landlocked or island locales. There are many areas of the world that are considered primary offshore centers including Luxembourg, Ireland, and Bermuda. These low tax-haven locations are especially investor-friendly and are internationally regarded as the predominant, and most secure, financial sectors in the world.
Offshore mutual funds are registered outside the United States under the laws of foreign countries. These funds are not subjected to U.S. Securities & Exchange Commission regulations.
Why do individuals and corporations invest in offshore funds? Overall, investors seek greater freedom than is possible onshore. Offshore offers eligible investors significant tax benefits not available with U.S.-registered funds. Offshore funds cannot be sold or distributed within the United States or to any citizen of the United States.