Is it possible to invest in foreign investment funds. Investments abroad. foreign insurance company

Until 2008, the Russian stock market showed excellent profitability, but the dull dynamics of recent years and the problems in the economy made many people think about investing abroad. In this article, I will talk about the main ways to invest abroad, what are the pros and cons.

Ways to invest in Russia

To begin with, let's recall what methods of investing in foreign assets in Russia are available to a private investor. This is:

traded on the Moscow Exchange;

And each of them has its drawbacks. Mutual funds charge very high commissions, which means they steal a significant part of the profits, there are questions about the quality of fund management. FinEx ETFs also have higher fees compared to ETFs from foreign companies. There are still very few shares of American companies on the St. Petersburg Stock Exchange and you have to pay a high tax on dividends.

Therefore, unfortunately, these tools cannot be called optimal.. Also, do not forget that the choice is not very large: several dozen mutual funds, 11 ETFs and just over 50 US stocks.

Work through a Russian broker

Another way is through a broker. Some Russian brokers allow their clients to buy securities that are traded on foreign exchanges, but this is only available to qualified investors. To qualify as a Qualified Investor, you must meet at least one of the following:

Own securities and other financial instruments whose total value is at least 6 million rubles.
Have two or three years of experience in an organization that has carried out transactions with securities and other Financial Instruments.
Make transactions with securities and (or) with derivative financial instruments, for the last four quarters, on average, at least 10 times a quarter, but at least once a month. At the same time, the total price of such transactions should be at least 6 million rubles.
Own property worth at least 6 million rubles. In this case, only the following property is taken into account: cash in bank accounts, compulsory medical insurance, securities.
Have a higher economic education or any of the following attestations and certificates: qualification certificate of a financial market specialist, auditor, insurance actuary, Chartered Financial Analyst (CFA) certificate, Certified International Investment Analyst (CHA) certificate, Financial Risk Manager (FRM) ".

Thus, in order to invest in foreign assets in Russia, you need to be a qualified investor or be content only with what is traded on Russian stock exchanges.

Other reasons that encourage the transfer of capital abroad:

lack of confidence among some investors in domestic financial institutions;
a much larger selection of financial instruments;
weak economy;
political and geopolitical risks;
a strong weakening of the ruble;
high inflation;
problems in the banking system;
poor investor protection.

Foreign investment

Many believe that foreign investment is only available to the very wealthy. In fact, you can open an investment account in a foreign company even with a small amount. At the same time, we are not talking about muddy foreign offices, but about large companies that are controlled by state regulators.

Another myth is that Russians are not allowed to make foreign investments. Indeed, a number of laws have recently appeared requiring foreign account holders to report to the tax authorities, but there is no talk of a ban. There are ways to invest that allow you to legally reduce the level of communication with the tax and control over your accounts.

It is also not necessary to be fluent in a foreign language. Some foreign companies have already mastered the Russian language and make it possible to communicate in their native language.

Advantages of foreign investment:

a wide range of financial instruments;
more opportunities for portfolio diversification across countries, currencies and asset classes;
diversification of funds by country (keeping money in the accounts of foreign companies, and not only in Russia);
more favorable conditions for financial instruments and investment conditions;
direct access to the exchanges of other countries without unnecessary intermediaries;
more reliable and high capital protection (much more than 1.4 million rubles);
the possibility of obtaining passive income (foreign funds pay dividends, unlike mutual funds).

There are currently three ways to invest abroad:

through a foreign bank
through a foreign broker
through a foreign insurance company

foreign bank

If we talk about investing through foreign banks, then first of all it concerns the clients of Private Banking - a service for wealthy clients, within which the bank offers banking, investment and consulting services. Investor capital requirements are usually from 100 thousand to 1 million dollars / euros and more. And the larger, more famous and more reliable the bank, the more the amount required. On the one hand, the bank offers such clients some unique services, advantageous offers, provides a personal manager or financial advisor, and so on. But the investor has to pay a lot for this comfort.

Usually banks already have ready-made investment proposals - portfolios, their own funds, structured products. Therefore, they first of all offer their customers their own products, which may not be the most profitable and optimal in terms of commissions, costs and composition. In addition, large banks are financial holdings, which, in addition to the bank itself, also include a management company, a broker, an insurance company, so the bank will seek to sell other financial products to the client, such as life insurance.

By the way, last year large Swiss banks introduced commissions for Russians with less than $5 million in their account, in the amount of 1,000 Swiss francs per month. Thus, they try to refuse to work with "small" clients.

Opening an account in a foreign bank entails the obligation to notify the tax authorities of the opening of such an account and to report annually on the cash flow in the account. In addition, the banks themselves may ask you to document the legality of the origin of your funds, as they do not want to be involved in money laundering mechanisms. You will also have to file a declaration and pay income tax on your own.

As for bank account insurance, the amount of insurance depends on the country: in the EU countries 100 thousand euros, in the UK 75,000 pounds, in Switzerland 100 thousand francs, in the USA 250 thousand dollars.

Foreign broker

Foreign brokers can be conditionally divided into two categories:

foreign subsidiaries of Russian brokers
directly

Daughters of Russian brokers

Most foreign subsidiaries of Russian brokers are registered in Cyprus. This carries additional risks, since Cyprus is not the most reliable jurisdiction from an economic point of view, it has low credit ratings, and in 2013 Cyprus experienced a serious financial crisis.

Another disadvantage of Cypriot brokers is that they work through a sub-broker, that is, they do not have direct access to foreign exchanges, so they buy securities through other brokers (American or European). Brokerage account insurance amount up to 20,000 euros.

The pluses include the fact that communication with the broker will take place in Russian, as well as lower commissions compared to other foreign brokers. To open an account, you will need an amount from 200 to 10,000 dollars.

Foreign broker

A more reliable way to invest. Unfortunately, over the past couple of years, several American brokers have stopped opening accounts for Russians and have limited operations on existing accounts: E-Trade, Zecco, Ameritrade, Firstrade, Charles Shwab. But there is still a choice.

Advantages

The advantages of such brokers include that they are registered in economically reliable countries - the USA and Europe. They are subject to local investor protection laws and regulated by local regulators. By opening an account with a foreign broker, the investor excludes a less reliable intermediary from the chain represented by a Cypriot daughter and gets a direct access to the stock exchange.

Transactions are made online in real time, a very wide range of instruments can be available to the investor: ETFs, stocks, futures, options. Moreover, the broker can give access to exchanges of different countries. Commissions for a transaction can be fixed or as a percentage of the transaction amount. Funds from the account can be freely deposited and withdrawn at any time.

The amount of account insurance with American brokers is up to 500 thousand US dollars, with European ones up to 20,000 euros. To open an account, you will need an amount from 250 to 10,000 dollars or euros. Communication in most cases takes place in English, but some foreign brokers have Russian-language sites and the ability to communicate in Russian.

disadvantages

The disadvantages include higher commissions compared to Russian subsidiaries and the risk of refusal to open accounts for Russians or the introduction of restrictions on already opened accounts. But compared to other ways of foreign investment, this one is the most economical.

All transactions for the purchase / sale, deposit / withdrawal of funds will have to be carried out independently.

Another disadvantage that concerns working with all foreign brokers is the need to file a tax return and pay tax every year, since foreign brokers are not tax agents for Russians. You do not need to notify the tax office of opening a brokerage account.

foreign insurance company. unit-linked.

occurs by opening an insurance policy, which is similar to opening an account with a broker or a bank. This type of investment is called. In this case, the insurance policy is only a legal formality and does not carry insurance protection. The meaning of such a program is to optimize taxation and capital inheritance mechanisms.

At the moment, policies for Russians are opened by three foreign insurance companies: Royal London, Investors Trust and Hansard. All three companies are registered in offshore zones: Royal London and Hansard on the Isle of Man, Investors Trust on the Cayman Islands. All three jurisdictions belong to the so-called "white" offshores, on their territory there is a legal system based on Anglo-Saxon law.

There are two types of plans available to the investor: a savings plan with monthly installments starting at $100/month or a plan with a one-time contribution starting at $10,000. The policy can be opened for a period of 5 to 25 years.

Under this policy, the investor can purchase certain financial instruments offered by the insurance company. Usually this is a wide list of mutual funds (mutual funds) of various foreign management companies. For large accounts with amounts of several thousand dollars, almost any exchange-traded instruments are available: stocks, bonds, ETFs.

Benefits of unit-linked

It is difficult to make a diversified portfolio of Russian instruments. The main exchange turnover falls on papers of no more than a dozen issuers and a couple - three futures. Asset prices are highly dependent on the political environment, which has clearly not improved in the past few years. As a result, it is very difficult to form a long-term portfolio of Russian stocks.

Therefore, investors make a choice in favor of foreign securities. You can invest in them through a broker, bank, mutual fund or insurance company. This article discusses each method in more detail.

Through Russian brokers

Russian brokers allow you to trade foreign securities from the S & P500 index on the St. Petersburg Stock Exchange.

On the Moscow Exchange, through ETFs, you can invest in Eurobonds of Russian companies and shares included in MSCI indices.

Access to the Moscow and St. Petersburg stock exchanges can be obtained by any investor - you need to choose a suitable Russian broker.

Another option, almost never seen in practice, trade foreign instruments through a Russian broker who has opened an account with a foreign prime broker.

Technically it looks like this. The Russian broker himself becomes a client of the broker of the country where a qualified investor needs access. That is, he acts as a sub-broker. The money of all his clients trading in a particular country is in the account of a foreign broker.

The clients of the Russian broker have access not only to shares from the S&P 500 index, but also, for example, about three thousand American securities on US exchanges. This requires the status of a “qualified investor”.

Investing through a Russian broker is easy. You can open an account at the broker's office or remotely. From the documents you need a Russian passport, TIN and bank details.

Russian broker - tax agent of clients. When withdrawing money from the account, the broker, if there is income, withholds personal income tax and transfers funds to the tax authority.

Be prepared for currency revaluation - foreign securities are traded in foreign currency, but profits for taxes are fixed in rubles. The volatility of the exchange rate can seriously affect it - not always in your favor.

Long-term investors may receive a tax deduction. This will require IIS and three years, during which the funds will be in the account.

The state controls brokers, but does not insure funds. Licenses for Russian brokers are issued by the Central Bank. Unlike bank deposits, brokerage accounts in the Russian Federation are not insured, therefore, in the event of fraud by a Russian broker or its bankruptcy, the state will not return the money to you.

In some countries, such as the US, brokerage accounts are insured. But legally, the client of a foreign broker is not you, but your sub-broker. If something happens to a foreign broker, the insurance payments will be received by the Russian one, and then distributed among the clients. Not the fact that everyone will receive the full amount.

Through foreign subsidiaries of Russian brokers

Some Russian brokers have subsidiaries abroad - usually in Cyprus due to the peculiarities of the tax regime. They allow unqualified investors to invest in a wider range of foreign instruments than Russian brokers.

Investing is a little more difficult than through a Russian broker. The process of opening an account is about the same as that of a Russian broker. You don't need to notify the IRS. But with the help of a broker, you will have to fill out a declaration and pay personal income tax.

Foreign subsidiaries of Russian brokers, as a rule, do not provide direct access to the exchange. They act as sub-brokers - they connect you with a prime broker who is already filling your orders on the exchange. Therefore, commissions for sub-brokers are usually higher than when working with prime brokers.

Most foreign subsidiaries of Russian brokers are registered in Cyprus. Issues licenses and controls them CySEC.

Brokerage accounts in Cyprus are insured for €20,000 if the broker is part of the ICF (Investment Compensation Fund) organization. Therefore, in the event of bankruptcy or revocation of the license of such a company, you will be compensated.

If you are a client of a Cypriot broker, but work on an exchange in another country, the conditions are different. In some other countries, such as the US, brokerage accounts are also insured. But legally, the client of the local broker is not you, but your sub-broker. If something happens to a foreign broker, the Cyprus broker will receive insurance payments, and then distribute them among clients. Not the fact that everyone will receive the full amount.

Through foreign brokers

Another option to buy foreign securities is through a major foreign broker. It will provide access not only to the most liquid instruments, like the Russian one, but also to less popular ones.

Investing through a foreign broker is a process of medium complexity. Required documents may vary by country and broker. You will most likely need to verify your identity, place of residence, and financial status. Many brokers have minimum account balance requirements.

Unlike foreign subsidiaries of Russian brokers, "pure" foreign companies do not always have a Russian version of the site and Russian-speaking support. Be prepared to discuss emerging issues in a foreign language.

You do not need to notify the tax office of opening an account with a foreign broker. You will have to fill out the declaration and pay personal income tax on your own.

The broker gives direct access to exchanges in their country. Unlike buying foreign instruments through a Russian broker, there is only one intermediary between you and the exchange. Therefore, the fees for this method are lower.

Reliability varies by jurisdiction. Issues licenses and supervises brokers by the financial regulator of the country in which they operate. The risks of this jurisdiction are added to the risks of the companies themselves. In case of disputes, it is worth remembering that you will have to sue in this country and according to its laws, which can be very costly in terms of time and money.

In some states, brokerage accounts are insured. These include the US, England, Germany, Switzerland and other EU members. Therefore, if a broker from these countries goes bankrupt, you will receive compensation. Its maximum size depends on the country. For example, in the USA it is $500 thousand, and the broker must be a member of the SIPC (Securities Investor Protection Corporation) organization.

Through foreign banks

Banks offer their clients investment services within Private Banking. Large banks usually give access to even uncommon instruments and offer structured products.

With this method, you can combine work with securities and banking services - for example, get a loan secured by a portfolio.

Investing through large foreign banks is difficult and expensive. To become a Private Banking client of a foreign bank, you need a significant amount. For Russian clients, the threshold for entering the top 5 banks according to Forbes is from $3 million.

To open an account, you must notify the tax service of the Russian Federation and confirm the origin of funds. Given the geopolitical tensions, this may not be enough - they can refuse to open or freeze assets even if there is confirmation.

At the same time, the bank may not have a website in Russian and Russian-speaking support. Be prepared to discuss emerging issues in a foreign language.

In the process of working with an already opened account, explicit and hidden commissions are usually higher than with other types of investments. At the same time, the investor can be actively offered a certain portfolio or financial products of the bank and related companies.

You will have to pay taxes on your own. Unlike Russian brokers, foreign banks will not draw up a declaration for you.

Funds are protected. Bank accounts are usually insured if the bank is part of an investor protection organization operating in the country. But when concluding a contract, this must be checked - insurance may not apply to non-residents. The amount of insurance depends on the specific country.

Through Russian mutual funds

Some Russian mutual funds invest in foreign financial instruments. They invest in ETFs or directly in foreign stocks, bonds and other securities.

There is no list of such funds, but there are general lists of Russian mutual funds. A fund's investments in foreign assets can often be guessed by the name, if it contains a region or the words "global", "emerging markets" and so on. You can find out exactly where a particular mutual fund invests in the rules of the fund. They are published by the management company (UK).

Investing through a fund is easy. Buying a share in a mutual fund allows you to invest in securities without opening a brokerage account. At the same time, you can invest a small amount, which is good for novice investors.

The registrar will control the funds. If the fund specializes in US technology stocks, you will not be able to use your share to buy German government bonds. And not for all securities there is a mutual fund. Therefore, investing through a fund is not suitable for those who want to manage their money on their own and have access to a large number of tools.

Funds are not insured. Investments in funds, unlike deposits, are not insured by the state. If the management company of the mutual investment fund loses its license or goes bankrupt, the funds will be transferred under the management of another company. But the state does not guarantee the return of shareholders' funds if the management company uses them to solve its financial problems.

Through insurance companies

We are talking about investment life or health insurance. The process is usually this: an insurance policy is bought. The funds with which it was purchased are invested by the insurance company in the assets selected by the client. The list of possible instruments can be narrow or extensive depending on the company and the tariff.

If the client survived or was not injured until the end of the policy, the amount invested in the policy and the income from investments are returned to him. Otherwise, the insurance payment is transferred to the client or the person chosen by him.

Alexander Butmanov, managing partner of the fintech company DTI Algorithmic:
“You are legally buying a policy, but in reality it is a hidden trust agreement. Your property (money) goes to the insurance company and is ostensibly invested independently of you. The company, as it were, “on its own behalf” does what you “do not ask” it, but actually does everything that you tell it to.
At some point, regulation may change, and such insurance is recognized as a hidden trust. Then you will have to report to the state accordingly. But so far there is no such thing.
Russia also has investment insurance, under which you can enter foreign instruments. But the choice of foreign securities, I think, is much less than Russian.”

Buying a policy from an insurance company is simple, but you need to understand the details. It does not require large expenses, the documents require a passport and proof of residence.

It is necessary to carefully read all the conditions - what is included in the insured events, how income and insurance payment are formed, whether you can withdraw money ahead of schedule, and so on. At the same time, a foreign insurance company may not have a website in Russian and Russian-speaking support. Therefore, emerging issues will have to be discussed in a foreign language, which can lead to misunderstandings.

Buying a policy is a long-term investment. The policy is usually valid for several years or longer.

Investment insurance usually offers tax benefits. Their essence and size depends on the country. In Russia, personal income tax is paid only for income exceeding the refinancing rate of the Central Bank, and only at the end of the policy. The insurance payment is not taxed.

The funds invested in the policy will disappear only if the insurance company collapses. Money invested in investment insurance cannot be confiscated, sued, or divided in a divorce. But in Russia and many other jurisdictions, they are not insured against the bankruptcy of an insurance company or the revocation of its license.

Remember
Global financial markets are more liquid and offer a greater choice of investment instruments.
It is advisable to trade foreign securities through a broker or a bank, and inefficiently through a mutual fund or an insurance company. The methods differ in availability, reliability, number of instruments and commissions.
Remember that only Russian companies and banks are controlled by the CBR. When working in other jurisdictions, find out which organization issues licenses to financial companies and which insures accounts.
When choosing a method, think about the investment period. Insurance policies, shares in mutual funds and some brokerage accounts provide tax benefits to long-term investors. However, early termination of such accounts may be limited or subject to high penalties.

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"Foreigners will help us!"
Ostap Bender, character "12 chairs"

There are no patriots when it comes to taxes.
George Orwell, Brit. writer

Investing in Russia is a huge instability. Recall the year 1991, when the savings of citizens in banks immediately depreciated, and it became possible to buy a kilogram of sweets for life insurance payments ... Or 1998, with its growth in the dollar rate several times in just a few months ... Or 2008 when the stock market "safe haven for investors" lost more than 70% in a year (the worst result in the world) ... Recent events also do not add optimism.

Investment is a long-term process. It can take 10-15-20 years to build enough capital to meet your financial goals. And at such intervals, the reliability of investments comes to the fore. What is the use of the average return of the Russian stock market of 25% if it is associated with the possibility of losing everything in a matter of days!

Economic risks of investments in Russia are associated with the one-sided development of the country. The strongest dependence on the export of resources leads to the fact that the profitability of most investments directly depends on energy prices. The price of oil is growing - and you can invest in any shares of the stock market, everyone will grow. The gas price has fallen, and no matter what Gazprom does, its stock quotes will go down.

And there are also political risks. The state owns stakes in key Russian companies. The small size of our stock market allows the state and other major players to direct its movement in the right direction. Often such "interventions" do not take into account the interests of small private investors.

Long-term investments in Russia are a huge risk caused by completely non-market reasons, and therefore unjustified. It is not surprising that interest in investing abroad is growing year by year.

How to invest abroad?

Foreign investments are available not only to the elite. They are not as difficult as it seems at first, and do not require serious capital. Let's look at ways to invest in foreign assets in Russia. We will focus only on those options that can be recommended as reliable in terms of protection against fraud. All kinds of offshore companies in the Seychelles, Nauru, Liberia, Myanmar, etc., trading CFDs, binary options and similar instruments without actually buying assets, have a very approximate relationship to investments.

We will consider the possibility of formally purchasing assets - stocks, bonds, fund shares and other capital creation instruments. And you can choose the appropriate method based on your goals and financial capabilities.

In total, there are 3 ways to invest in foreign assets:

Investment bank account.
Buying assets through a broker.
Purchase of assets through an insurance company (English way).

Investment bank account

Banks are the most popular financial intermediary in Russia. That is why they are the first to come to mind when it comes to investing abroad. Alas, this is far from the most optimal way to invest.

The essence of an investment bank account is that it stores not so much money as assets. The bank, at the request of the client, buys for him shares, bonds, shares of funds and other securities. Large banks are usually included in various financial groups that include companies from the entire financial sector. This allows the bank to create a one-stop private banking service without the investor having to turn to other companies. This versatility, unfortunately, turns out to be the only plus of Private banking.

The list of cons is overwhelming.

First, private banking is available to very wealthy people. Foreign banks will not consider applications with amounts less than half a million dollars.
Secondly, the bank is not interested in promoting the services of competitors and, first of all, will offer its own investment products.
Third, banks tend to have higher management fees than other intermediaries.
Fourth, Russian residents are prohibited from receiving money in foreign bank accounts. That is, according to the law, the profit from investments must be withdrawn to a Russian bank, and from it to make a transfer to your foreign account. Bypassing this law is fraught with administrative and, in some cases, criminal liability.

Brokerage account

For those who are already working on the Russian stock market, there is nothing new in brokerage services. Abroad, everything is arranged in the same way. You open an account with a foreign broker and get online access to trading on the stock exchange. You make transactions yourself, buying and selling assets, and the broker takes a commission from you for each transaction.

The main advantages of this method of investment are efficiency and independence. Transactions are made online almost instantly, the liquidity of your portfolio is maximum. Plus, you choose when and what assets to trade.

Commissions from brokers are hundredths of a percent per transaction, which is a couple of orders of magnitude lower than in the banking sector.

Independence of decision-making has a downside - the cost of time and the language barrier. Few Western brokers have Russian-speaking technical support, and a thorough analysis of assets for a purchase will take more than one hour, or even more than one day.

The minimum entry threshold for opening an account with American brokers is $5,000 - $10,000. Recently, some brokers refuse to open accounts for Russian investors in light of increased tensions between Russia and the West. However, politics is politics, and business is business.

Among Russians, the most popular are companies and

In general, a brokerage account is suitable for experienced investors for whom flexibility and complete control over their assets are the most important characteristics of a portfolio.

Large Russian brokers (BCS, Aton, Finam, etc.) also offer access to foreign markets. The minimum amount to open such an account is $1,000 - $2,000. You have Russian-speaking support, but higher commissions and often a limited set of assets for trading.

Investment through an insurance company

English investment method (unit-linked plan)- the purchase of assets, legally formalized as a life insurance policy. There is no insurance, as such, in the English method - in fact, this is an ordinary brokerage account, and the policy is just a way to optimize taxes and obtain additional non-market benefits.

A unit-linked plan allows an investor to access an unlimited range of international instruments, including deposits in Western banks, mutual funds and ETFs, securities and derivatives, structured products, etc. The insurance company works as a broker, that is, it simply executes an order for the purchase and sale of assets, and at the same time combines the possibilities of private banking in terms of choosing investments and legal protection of capital.

The main market advantages of the "English method"

Reduced commissions.

The insurance company works with financial instruments in bulk, receiving a lower level of commissions, which is not available to private investors. In addition, insurance companies give investors a loyalty bonus if you invest for 5-10-15 years. No broker will offer you such payments.

There is a possibility of capital accumulation.

If we consider the "English method" as an analogue of a brokerage account, then the entry threshold for brokers will be lower. Insurance companies will open an investment program for you from $20,000 to $30,000. However, insurers offer savings programs with periodic payments of 100 - 500 dollars a month. This makes the Unit-linked plan the most democratic way to invest abroad.

Guarantees of safety of capital in case of problems with the insurance company.

90% of your funds are immediately transferred to the trust. Thus, investors' money and insurance company's money are separated physically and legally. Any financial problems of the insurer affect only 10% of clients' funds. But you need to understand that this protection does not apply to market losses of investors - if you invested in an unsuccessful instrument and lost 50% of your capital, no one will return these losses to you.

Non-market advantages of the "English method"

Clear inheritance procedure

. By law, heirs are entitled to receive inheritance six months after the death of the testator. The insurance capital is paid without delay to the person indicated in the insurance policy.

Favorable taxation.

Companies offering investment according to the English method, as a rule, are registered in offshore zones, and there are no taxes at all. But even if the money is returned to Russia, there is tax optimization. According to the law of the Russian Federation, payments from insurance companies under life insurance policies are taxed only to the extent that profits exceed the refinancing rate.

The anonymity of capital.

A trust or trust fund ensures the anonymity of your investment. The money is managed on behalf of the trust, and information about its participants is not subject to disclosure.

The main disadvantage of insurance investment programs is low liquidity. Unit-linked plans are usually long-term contracts, concluded for 15-25 years. Termination of the contract during the first 2-3 years is fraught with a complete loss of investment - the insurance company will not even return the money that you deposited to your account. And for some more period, you can terminate the contract, having received only part of the capital.

You need to be especially careful when concluding funded programs. Don't forget about currency risk. If suddenly, due to a sharp jump in the exchange rate, you cannot pay the agreed 100-500 dollars per month under the contract, the contract will be terminated and you will lose money. In the last two years, this situation is not uncommon, because naive investors, succumbing to the persuasion of consultants, often entered into such programs on the verge of their financial capabilities.

In times of crisis and uncertainty, such advice does more harm than good.

The course "How to become an investor" will relieve you of many illusions about investments and teach you the basics of effective money management in any conditions.

After studying chapter 7, you will know the content of the concepts of foreign investment and foreign investment, the main forms of foreign investment, the causes and consequences of foreign investment by international companies, the instruments of foreign investment; be able to distinguish between direct and portfolio investment.

THE CONCEPT AND FEATURES OF FOREIGN INVESTMENTS

International companies expand their business not only within the country, but, as a rule, also beyond its borders. It is not for nothing that transnational companies are mainly companies that represent the capital of one country, but operate in several foreign countries. This is what presupposes the expansion of activities through the implementation of foreign investments.

There are two concepts that are opposite in meaning - foreign investment and foreign investment. Foreign investments are investments of an enterprise abroad, in other words, the export of capital, foreign investments involve the receipt of investments, attracting investments to the company, i.e. capital import. The statistics use the term foreign direct investment, but always indicate the outflow or inflow of investment. In terms of content, these two close concepts are somewhat different from each other, which is reflected in their definitions. Let us consider foreign investments in more detail and dwell on their characteristics.

So, foreign investment- this is the export of capital abroad with the aim of systematically making a profit. Foreign investments are understood as property and (or) intellectual values that are invested by investors from other countries in the object of entrepreneurial activity in order to make a profit.

The main reasons and prerequisites for the development of foreign investment are, first of all, an excess of money capital in the country of investment, as well as high competition in the country where the international company is based. The desire to increase profits leads to the fact that capital is constantly in search of more profitable premises. As a rule, capital finds new opportunities in other countries. As a result, there is an overflow of capital on a global scale. Among the factors contributing to such an overflow, one can name factors that contribute, on the one hand, to the export of capital, and on the other, to the import of capital. Excess capital, expansion of the company, concentration and centralization of capital lead to the need for a profitable investment of capital, however, certain legislative obstacles (for example, antitrust laws), reduced demand for products in their own country, increased competition and increased barriers to entry into the market within the country force owners to export capital. In the context of globalization, the field of activity of a large company is practically the entire world economic space. On the other hand, there are positive factors for the development of business abroad, such as the possibility of lower costs for working capital, labor and raw materials, lower barriers to entry, high demand for products, and sometimes tax incentives of the host country, all this also contributes to foreign investment (Table 7.1).

Table 7.1

Reasons for foreign investment

The factors that stimulate modern foreign investment include the increased interdependence of national economies, which is the result of deepening the international division of labor and the internationalization of production, international cooperation, the policy of openness of the economy in developed countries and the creation of a favorable environment for the import of capital into developing countries, the aggravation of global problems, the activities of international economic organizations.

In general, foreign foreign investment allows the company to bypass trade barriers - both obvious and non-obvious, to move from exporting products manufactured in the home country to organizing a foreign branch or affiliate that expands sales in another market, to provide the opportunity for a sharp increase in production and sale of goods and the opportunity for collaboration in co-production, joint venture with local partners, co-marketing, licensing, etc. Access to a new market is another main reason for investing abroad. At a certain stage in the development of a company, the export of products or services reaches its critical point in terms of volume and value, at which point the organization of production and sales in another country becomes simply cheaper than continuing direct export.

However, the presence of only one desire of the owner and favorable opportunities is not always enough to place investments abroad. In these cases, the company must weigh the pros and cons to make a final decision. It is considered that investments abroad become possible if:

1) individual capitals in the process of concentration and centralization reach such proportions that they are able to bear the risk and costs of the start-up period associated with the creation of new production units abroad. These include funding opportunities, a favorable legal climate for foreign investment in the host country;
2) international economic, currency, trade and tax practices make it possible to ensure, in the long term, the profitability of moving production abroad and related financial transactions (for example, transfer of profits);
3) the level of development of the international communications system ensures the exchange of goods and coordination activities between the parent and subsidiaries;
4) in the country where investments are received, an institutional framework is created to ensure the functioning of production at an enterprise with foreign investments and the possibility of selling its products in the domestic and national markets of this country.

Any company decision to invest abroad is the result of studying and considering several factors, such as:

assessment of own resources;
product competitiveness;
market analysis;
forecast of demand for the company's products in the country's market.

As part of the study of the above factors, it is necessary, first of all, to determine the real opportunities for foreign investment, the availability and adequacy of the company's resources to support the foreign branch during the period of its formation. Secondly, it is necessary to conduct a market research, which includes an analysis of the state of the industry, product range and legislation of the country in which the branch is located, in particular the legislation on foreign direct investment, on national industry, as well as an analysis of tax laws, incentives, ways of financing, distribution channels, an overview of available resources and other costs that will be associated with the investment. It is also necessary to prepare a forward plan focused on a reasonable period of market development based on the chosen strategy, taking into account possible political risks and the risks of a sharp change in exchange rates.

At the same time, companies should strive to adequately assess the risk of not only placing investments, but also the effectiveness of their functioning. In other words, not only an assessment of the initial investment is necessary, but also a forecast of the profitability of investments made in the future. This is especially important provided that the objects of investment can be both financial and industrial investments. The first include securities - stocks and bonds, the second - real estate, production facilities, ready-made enterprises, property rights. In addition, this list will also include rights to the results of intellectual activity, which can be defined as intellectual property rights, as well as the right to economic activity, which is granted in accordance with the law or under an agreement.

The main objects of investment are:

Property, i.e. buildings, equipment, any structures

securities, which include shares, bonds, shares, etc.;
property and non-property rights, in particular the right to

intellectual property, patents, licenses, right to

economic activity.

Investment instruments are most often securities of companies, as well as direct financial investments in the form of supplies of goods, equipment as a certain share of the authorized capital of an enterprise. In some cases, foreign companies, either jointly or individually, create new companies abroad, supplying both monetary and commodity resources. However, as practice shows, investments in securities remain the main instruments of foreign investment - more often shares, less often bonds, since the former, in principle, make it possible to manage a company and establish control over it, as well as participate in the distribution of company profits. In recent years, foreign investments are directed not to the creation of new companies, but most often to the opening of branches, subsidiaries, and are also used for mergers and acquisitions.

Depending on the share of foreign investments in the capital of enterprises, certain types of investor participation are distinguished in different legal areas. It can be either a joint venture, or an enterprise with foreign capital, or a subsidiary or branch, etc.

An example from practice. In the Anglo-American system, particular importance is attached to the so-called participation in property management - this is the placement of entrepreneurial capital in other countries in the form of long-term investments in order to create foreign enterprises, branches, subsidiaries and mixed companies in various sectors of the economy, focused on obtaining not only profit, but also revenue shares to cover fixed and variable costs. In the countries of the North American Free Trade Association (NAFTA), Great Britain, the Netherlands, Belgium, Israel, Australia, New Zealand, a share in property is considered to be more than 10%, provided that they belong to non-residents from one country. In the Anglo-American scientific literature, international production, in which the share of national companies exceeds 10%, is usually called the "second economy". Emerging market legislation widely uses the concept of a foreign-owned enterprise to apply to companies with between 51% and 100% foreign ownership. The concept of a joint venture applies to companies with foreign capital from 25 to 51%, and the legal status of national business entities fully applies to it. However, in foreign countries, the share of one of the joint venture partners (joint venture) may exceed 51%.

The main purpose of such classifications is to single out into an independent statistical group the branches and departments of foreign companies whose economic activity is subject to higher rates of income taxes and profit taxes. Enterprises with foreign capital receive benefits, as a rule, only in two cases: if they specialize in the production of industrial products, 50% of which is exported, and if at least 80% of the workforce is national labor resources. In relation to enterprises with foreign capital, there are restrictions on the acquisition of real estate, land, repatriation of profits. A foreign investor faces a large set of restrictions on the sectoral allocation of capital, he must notify the state authorities about the content of investment transactions and obtain appropriate permits.

Foreign investment classified according to different criteria:

in relation to individual countries, investments are foreign, i.e. involved, and foreign, i.е. exported;
by source of origin;
according to the form of ownership, they are divided into private investments and public investments;
according to the degree of control over enterprises and other economic entities, they are divided into direct and portfolio;
according to the nature of use, investments are divided into entrepreneurial and loan;
according to the method of accounting, they are divided into current investment flows and accumulated ones;
By types, foreign investments are classified into fixed, current (raw materials, cash), financial (currency and securities) capital.

The main directions of foreign investment initially

there were countries that could provide cheaper raw materials and labor, as well as provide demand for finished products. In addition, foreign companies did not need to spend money on the invention and discovery of new technologies, since the companies already available and sometimes even obsolete in the home country were still new for the recipient country. The main objects of export of investments were mainly raw materials and agricultural areas, and only later did TNCs begin to develop individual industries in order to export not only raw materials, but better the results of the manufacturing industry. They dominate the mining and trading of agricultural products. The share of developing countries in total world capital investment has steadily declined since the mid-1970s, declining to 17% in the 1980s. compared to 25% in the 1970s. In the 1980s and 1990s Due to the rapid development of low-cost industries in Southeast Asia, significant investment flows have been diverted to this region.

Subsequently, despite the absolute growth of foreign investment, the share of developed countries in the total volume of accumulated foreign investment decreased, there is a kind of exchange of foreign investment between different groups of countries, primarily between developed countries with a market economy.

Among the relatively new trends that have emerged in the field of international capital flows, along with an increase in investment inflows to developed countries and a relative decrease in developing countries, one can note the transformation of a number of developed countries from leading exporters of capital into its importers, the transformation of a number of developing countries into investors of capital, the growth in the activity of foreign companies in the countries of the European Community in anticipation of the emergence of an integrated domestic market in it, the growth of foreign investment in Eastern Europe and Russia.

The steady upward trend in the export of capital, deepening the international division of labor, reflects the objective needs of the development of productive forces in the conditions of scientific and technological revolution. The scope of domestic markets is becoming narrow for efficient production. This is especially true of technologically complex science-intensive products of advanced industries, the release of which is often impossible without international cooperation. For example, the rapid progress in the production of computers has led to the fact that products become obsolete within two to three years. Efficient is mass production tailored to individual needs, hence the strategy of firms operating in highly concentrated industries (for example, in the automotive industry) and in high technology industries, focused not on national or regional scales, but on the global economic space.

The export of capital contributes to the emergence of such new forms of international economic relations as long-term rental of equipment (leasing), subcontracting contracts for the provision of engineering and construction works (engineering), technological, financial and other services. New forms to a certain extent reflect the evolution of the ways in which foreign capital is used on the territory of certain states, from full or partial ownership to contractual agreements related to the transfer of technology, household, information services. They also reflect the difference in the strategic intentions of the partners: for some it is the achievement of world leadership, for others it is overcoming the backlog.

Investment strategy and tactics basically imply not only the correct setting of goals and the time to achieve them, but also the choice of appropriate financial instruments for the full-fledged work of the invested capital.

At present, a rather difficult situation has developed in Russian investment practice, which is expressed in the fact that it has ceased to satisfy the majority of investors in many respects, for example:

Relatively low liquidity, decreased after the crisis of 2008-2009. several times. This is due both to the exit of the bulk of non-resident investors and the lack of significant demand for Russian assets from domestic investors.
Relatively small selection of worthy assets where you can invest in the long term. For example, the listing on the Moscow Exchange now contains shares of only 532 issuers, of which 80% can be classified as low liquidity or junk shares.
High risks of investing in the Russian stock market, which are associated with both geopolitical factors and protracted crisis phenomena in the economy.
The instability of the national currency which exposes investors' investments to significant risk.
Low financial literacy of the majority of the population, which has no idea and culture of investing, which significantly hinders the inflow to the stock market.

All these facts are confirmed by such clear data as, for example, a steady decline in both the total volume and value in the collective investment market, and a reduction in the number of funds themselves operating in financial markets (see Fig. 1). Under these conditions, many investors in Russia have to look for other ways and solutions on how to most effectively invest their capital, including abroad.

This article will talk about the collective investment market of the most developed foreign countries, about the funds themselves and institutions of this type of investment, and how in practice it is possible to invest abroad.

Of all types of investing with funds, the most popular among most private (unqualified) investors, or, more simply, ordinary people, are collective investment funds that have an ETF (exchange traded fund) model. However, besides them, there are a huge number of other types of collective and private investment funds, such as, for example, hedge funds (see).

Funds operating exclusively in the alternative investment and antiques markets. And there are even funds that invest capital for potential migrants or travelers (for example, the Brillstraits Fund).

However, the priority remains precisely for the ETF, as the most deployed system, focused on the bulk of the population.

Forms of collective investment are characterized by a certain degree of diversification of assets, reduced fees, and can be effective even in adverse market conditions. Relatively recently, the market for exchange-traded investment funds (ETFs) began to develop abroad.

This type of funds is characterized by the following attractive features:

relatively small fees
the ability to buy and sell ETF shares throughout the trading session at a price formed on the basis of supply and demand,
the ability to purchase and redeem ETF shares in tangible form, securities (abroad),
less taxation compared to equity funds
are not subject to taxation(the exception is).

The United States is the undisputed leader in the ETF market, occupying more than 2/3 of the entire global collective investment market. Moreover, it should be noted that the total capitalization of ETF funds around the world is about 33 trillion. dollars, with an annual increase of 2-3%.

Such attractiveness of ETFs is also due to the fact that the main element of the strategies of such funds is not only a wide diversification of investments by type of assets, but the use of various markets around the world for investing capital. For example, many backgrounds invest in the rapidly developing countries of Southeast Asia, the dynamics of the development of financial systems of which provides unique opportunities - the stock markets of Cambodia, Vietnam, the Philippines, Thailand, Laos, Indonesia, Singapore and some countries of South America.

How to Invest in ETFs - Practical Tips

It has become much easier than ever to make investments even abroad, and this does not require any special knowledge in economics, languages and other financial intricacies. For the practical implementation of investing your hard-earned money in collective investment funds, there are several simple ways.

Investing through a foreign broker. Buying shares through a foreign broker is very simple from a technical point of view, and all you need to do is enter the website of the broker itself, register, fill out application forms and select the appropriate type of fund (shares, bonds, real estate, etc.). This is usually followed by a document verification procedure (for example, passport data, proof of residence address).

The investor should also keep in mind that if a decision is made to act through a foreign broker, then the investor must be ready to:

to pay commissions for buying/selling ETF shares,
payments for no activity on the account or for a small number of transactions,
commissions for transferring funds to a brokerage account abroad.

However, the commissions will be relatively small compared to the protection provided by the Securities Insurance and Investment Protection Corporation (SIPC), or even more so the US SEC, if the broker is a member or is under its jurisdiction.

Protection is provided in case of bankruptcy or fraud by the broker. In the US, the sum insured reaches $500,000, in Europe, about 20-50,000 euros. The initial investment usually starts at $10,000, but there are funds that operate with a lower initial deposit. When using this type of investment, it is also important to be aware of the tax process.

Of course, it is necessary to transfer data on income to the tax service of the Federal Tax Service of the Russian Federation (with a tax return). This refers to agreements between countries on the elimination of double taxation. Thus, in the United States, the tax on dividends on securities is 10% and must be paid without fail, and the funds themselves do not always perform the function of a tax agent. Therefore, in such cases, you will have to make tax payments to the state treasury on your own.

Buying ETF shares through a Russian broker. If an investor does not have the possibility of direct interaction with foreign brokers, it is possible to purchase specific ETF securities through a Russian broker. Basically, the purchase of foreign financial instruments is carried out through subsidiaries of Russian brokers, which are usually registered in an offshore zone (they are also called sub-brokers). But in these cases, newcomers - investors should be extremely careful, because they are not protected from fraud or bankruptcy of Russian brokers (most often intentional), especially if the investments are offshore at the time of bankruptcy. In addition, the rates for transactions with such brokers are unreasonably high.
Another unique and little-known way to invest in overseas funds is to purchase ETF shares through an overseas insurance company. It is very strange that this method is not popular (maybe just Russians, not very well informed about it) among Russian investors, although this method of investment has many advantages. Insurance companies are financial intermediaries. An investor enters into an agreement with an insurance company to purchase a life insurance policy. Under a policy, a company acquires financial assets at the request of the policyholder. This method requires a high initial investment of 70,000 euros. However, the insurance company provides protection for invested funds (about 90% of the invested capital in case of bankruptcy, and sometimes up to 100%). The main advantages of this type of investment are:

in legal protection and tax efficiency. From a legal point of view, the capital of the policy is not divided between the spouses, there is a special inheritance procedure,
from a tax point of view, the investor is exempt from paying taxes in the country of incorporation of the insurance company, which is a huge advantage, both for long-term investment and for the preservation of his capital.

Acquisition of ETF shares through branches of foreign banks. It is still an uncommon way of investing. The Bank is a major participant in the financial market and makes large investments, both of its own assets and customer funds (for example, through trust management or wealth management programs). Therefore, the initial amounts are quite high. So, for example, foreign banks of the most famous brands accept initial investments from $50,000 to $1 million. The size of the initial investment depends on the degree of reliability of the bank and its fame. For example, in no less reliable Chinese banks, such amounts do not exceed 100-300 thousand yuan.

An investor with this method of acquiring ETF shares should be prepared for high commissions. Which is quite traditional for the banking business. In addition, the bank may refuse to invest in the financial asset chosen by the investor, since the bank usually forms its own products for sale and primarily cares about the amount of its own profit, and not about the welfare of the client.

It is also worth bearing in mind that, from a legal point of view, funds in bank accounts can be inherited in a general manner. Accounts are not protected from seizure, and funds are divided upon divorce.

Conclusion

In conclusion, it makes sense to note that the collective investment market, thanks to the penetration of new fintech, blockchain, and crowdinvesting technologies into the financial industry, is growing at a rapid pace, providing almost unlimited opportunities for investing and managing capital anywhere in the world, at any time, and most importantly, without unnecessary intermediaries. and other archaic controlling authorities.