With the autumn season fast approaching and many people returning from well-deserved summer breaks, I hope you forgive me for feeling that the worst of COVID and lockdowns seem to be disappearing in the rear-view mirror.

One of my only fond recollections of lockdowns was the birth of the ‘zoom quiz.’ I am sure many, if not all of us, partook in at least one of these events. While they may have grown tiresome at the time, I thought it could be nice to revisit the concept through a MASECO-themed quiz. Don’t worry, only one short round and we won’t be keeping score…

1.    After how many years of living in the UK will your estate be subject to UK inheritance tax?

a)    10 years
b)    7 years
c)    15 years
d)    15 out of 20 UK tax years

2.    Are you able to offset PFIC (Passive Foreign Investment Company) capital gains with PFIC capital losses?

a)    Yes, and capital losses can be carried forward indefinitely
b)    Yes, but only in the same year
c)    No, never

3.    What percentage of US Large-CAP funds underperformed the S&P 500 over a 10-year timeframe as of December 31st 2021?

a)    83.07%
b)    45.36%
c)    19.54% 
d)    65.89%

4.    From July 1926-December 2020, in overlapping 10-year periods, in the US equity markets, how often did value outperform growth?

a)    43%
b)    58%
c)    72%
d)    80%

Answers: 

Question 1 – the correct answer is d)

Following tax law changes brought in from April 6th 2017, a person who has been UK resident for 15 out of 20 tax years will become UK deemed domicile, with their entire global estate subject to UK inheritance taxes if they were to pass away. This can be quite a nasty surprise at what is already a very difficult time. There is some significant planning that can be done provided you know about these rules! 

Question 2 – the correct answer is c) 

The US Internal Revenue Service will not allow PFIC losses to be used to offset any PFIC gains, which can make the tax burden even more onerous and risky if holding a portfolio of PFICs.  

Question 3 – the correct answer is a) 

According to the latest numbers released by SPIVA, as of 31st of December 2021, 83.07% of US Large-Cap funds underperformed the S&P 500. 

Comparing these figures to some of the funds MASECO invests in, we can see consistent outperformance of benchmarks. 

Source: Morningstar.com. The figures refer to the past and past performance is not a reliable indicator of future results. Currency fluctuations may increase or decrease the returns of any investment. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. 
Performance figures are calculated on a total return basis, net of fees, assuming 1% annual management fee, charged on a semi-annual basis. 

Question 4 – the correct answer is d) 

A whopping 80% of these overlapping 10-year periods, value outperformed growth. 

With this kind of historic outperformance, we are looking to overweight value investments where possible in our clients’ portfolios. 

 
Information provided by Dimensional Fund Advisors LP as at 04 April 2022. Past performance is not a reliable indicator of  future results. Actual returns may be lower. In USD. Indices are not available for direct investment. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. Based on monthly rolling differences in annualized returns over the periods listed. Rolling multiyear periods overlap and are not independent. Indices are not available for direct investment. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. “One-Month Treasury Bills” is the IA SBBI US 30 Day TBill TR USD, provided by Morningstar. S&P data © 2021 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. See “Index Descriptions” in the appendix for descriptions of Dimensional and Fama/French index data. 

The Legal Stuff

This document is intended for the recipient only.  It may not be copied, forwarded or otherwise distributed, in whole or in part, to any other party without our prior consent.  This document is intended for clients of MASECO LLP and those who have expressed an interest in its investment services.

Nothing in this document constitutes investment, tax or any other type of advice and should not be construed as such. The views expressed herein do not necessarily reflect the views of MASECO as a whole or any part thereof.  All investments involve risk and may lose value. The value of your investment can go down depending upon market conditions and you may not get back the original amount invested. Your capital is always at risk.  Past performance is not a reliable indicator of future results. Information about potential tax benefits is based on our understanding of current tax law and practice and may be subject to change.  The levels and bases of, and reliefs from, taxation is subject to change. The tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

MASECO LLP (trading as MASECO Private Wealth and MASECO Institutional) is established as a limited liability partnership in England and Wales (Companies House No. OC337650) and has its registered office at Burleigh House, 357 Strand, London WC2R 0HS.  The individual partners are Mr J E Matthews, Mr J R D Sellon, Mr A Benson, Mr D R B Dorman, Mr H Q A Findlater, Mr T Flonaes, Mr E A Howison, Ms A L Solana and Mr N B Tissot.  For your protection, telephone calls are usually recorded.

MASECO LLP is authorised and regulated by the Financial Conduct Authority for the conduct of investment business in the UK and is registered with the US Securities and Exchange Commission as a Registered Investment Advisor.