Ring Fence

AAA

DEFINITION of 'Ring Fence'

A protection-based transfer of assets from one destination to another, usually through the use of offshore accounting. A ring fence is meant to protect the assets from inclusion in an investor's calculable net worth or to lower tax consequences.

Moves to ring fence an asset are often called "ring fence trades".

INVESTOPEDIA EXPLAINS 'Ring Fence'

There are many legal options available in many countries to ring fence assets, although many have caps that are set at a percentage of one's net worth. The main motivation for moving assets (or capital) into a ring fence is to free it from undue restrictions, tax burdens or other country-specific laws. Property or assets held outside a nation's jurisdiction cannot have claims brought on them, so they become "untouchable" by the investor's home country.


RELATED TERMS
  1. Tax Shelter

    A legal method of minimizing or decreasing an investor's taxable ...
  2. Offshore Mutual Fund

    A mutual fund that is based in an offshore jurisdiction, which ...
  3. Tax Evasion

    An illegal practice where a person, organization or corporation ...
  4. Off-Balance-Sheet Financing

    A form of financing in which large capital expenditures are kept ...
  5. Ringfencing

    When a regulated public utility business financially separates ...
  6. Strike Width

    The difference between the strike price of an option and the ...
RELATED FAQS
  1. I live in the U.S. How can I trade stocks in China and India?

    Foreign markets have always been an object of envy to domestic investors because the indexes in some foreign countries have ... Read Full Answer >>
  2. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  3. What is the effective interest method of amortization?

    The effective interest method is an accounting practice used for discounting a bond. This method is used for bonds sold at ... Read Full Answer >>
  4. What does an unfavorable variance indicate to management?

    In managerial accounting, an unfavorable variance is discovered when a company's management performs a comparison between ... Read Full Answer >>
  5. Is there a way to include intangible assets in book-to-market ratio calculations?

    The book-to-market ratio is used in fundamental analysis to identify whether a company's securities are overvalued or undervalued. ... Read Full Answer >>
  6. What risks should I consider taking a short put position?

    The risks to consider before taking a short put position are the odds of sustained weakness in the asset price and a spike ... Read Full Answer >>
Related Articles
  1. Retirement

    Build A Wall Around Your Assets

    Learn how to protect your money from lawsuits, creditors and other judgment proceedings.
  2. Personal Finance

    Pros And Cons Of Offshore Investing

    Tax loopholes are shrinking, but there are still plenty of viable prospects. Get the big picture.
  3. Economics

    Calculating Net Realizable Value

    An asset’s net realizable value is the amount a company should expect to receive once it sells or disposes of that asset, minus costs from its disposal.
  4. Professionals

    Gay Marriage Ruling: Its Impact on Estate Planning

    Same-sex couples now face the same legal and financial issues as heterosexual couples; some may need to adopt simpler, more mainstream financial plans.
  5. Professionals

    How to Best Navigate Taxes in Retirement

    Here's a rundown on tax strategies that can help extend the life of a nest egg.
  6. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  7. Investing Basics

    What is a Greenshoe Option?

    A greenshoe option is a provision in an underwriting agreement that allows the underwriter to buy up to 15% of the shares in an IPO at the offer price.
  8. Economics

    What are Deliverables?

    Deliverables is a project management term describing an object or function that must be provided or completed by a certain due date.
  9. Investing Basics

    What Does a Clearing House Do?

    A clearing house is a third-party agency or separate entity that acts as a go-between for buyers and sellers in financial markets.
  10. Taxes

    Understanding Write-Offs

    Write-off has different meanings depending on the context in which it is used, but generally refers to a reduction in value due to expense or loss.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!