Ring Fence

What is a 'Ring Fence'

A ring fence is 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.


Certain ring fencing activities are legal as long as they stay within the applicable limits, set in various laws and regulations established by the home country. Often, the limit is based on a certain percentage of the person or business's net worth, meaning the amount allowed with fluctuate over time. Ring fencing can produce certain financial benefits, such as lowering overall tax burdens and eliminating certain restrictions, along with removing the property from the jurisdiction of the home country.

Ring fencing is defined by the act of setting particular assets aside, removing them from the control exerted upon them within the current situation or directing the funds to a specific purpose.

While offshoring is one of the more common uses, moving funds into a different arena to allow a business to separate the higher risk ventures away from more stable assets also qualifies. Further, earmarking a particular set of funds or assets to a specific goal can also be seen as ring fencing, as these assets are functional separate from other activities that may put them at risk.

Ring Fencing as a Protection

Ring fencing is generally used to protect certain assets from affecting other assets or obligations. When using offshore accounts, the goal is to limit the taxation or regulation asserted over those assets, often protecting them from less favorable conditions. Additionally, the moved assets can be functionally hidden from creditors, limiting access to the assets in cases of default.

A company may choose to split operations, ring fencing riskier activities from those that are more secure by separating the riskier activities into a new entity. This provides protection; if the riskier venture fails, the more secure portion of the business can remain intact and may not be held liable for the losses associated with the failed portion of the business.

Ring Fencing and Government

A government may attempt to set regulations that force the ring fencing with certain industries to provide protection to the consumer. For example, a government may want to separate the traditional consumer banking services from the associated investment activities within a financial institution. This would protect the more stable banking activities, such as consumer deposit account activities, from the riskier activities that are more likely to result in losses or potential bank failure.

  1. Swing For The Fences

    To attempt to earn large returns in the stock market. The term ...
  2. Fence

    A risk-mitigating investment strategy that utilizes options to ...
  3. Fence (Options)

    A fence or collar is an option strategy that establishes a trading ...
  4. Ring Trading

    The method by which certain types of investment business is conducted ...
  5. Bidding Ring

    A group of individuals or businesses that conspire to affect ...
  6. Rings

    The locations on the floors of futures and options exchanges ...
Related Articles
  1. Personal Finance

    7 Mistakes to Avoid When Buying an Engagement Ring

    Understand why the purchase of an engagement ring is so important. Learn about seven key mistakes to avoid when purchasing an engagement ring.
  2. Personal Finance

    Should I Insure My Wedding Ring?

    It depends, in part, on the ring's value and your current insurance coverage. Here's a guide to making a decision that's right for you.
  3. Personal Finance

    How To Insure Your Wedding Ring

    Read on for everything you need to know to make sure this precious possession is covered against theft, damage, loss and more.
  4. Personal Finance

    New Home Repair Troubleshooting

    Think a new home means no repairs? Think again. Learn about common repair and maintenance items and how to cut your costs.
  5. Personal Finance

    Making Sure Your Jewelry Is Insured

    Homeowners insurance only covers so much - find out how to make sure your jewelry is covered for theft, loss and damage.
  6. Trading

    An Introduction To Consensus Indicators

    Learn how the herd is almost always wrong, or at least late in jumping on the bandwagon.
  7. Personal Finance

    Low-Cost Curb Appeal Projects For Your Front Yard

    Some low-cost improvements to your home's exterior and front yard could increase its curb appeal and ensure a great first impression on buyers.
  8. Markets

    Pros And Cons Of Offshore Investing

    Tax loopholes are shrinking, but there are still plenty of viable prospects. Get the big picture.
  9. Personal Finance

    How To Open And Access An Offshore Bank Account

    You don't have to be a master criminal or billionaire to open an offshore bank account. This article will walk you through the process.
  10. Insights

    Cornetto Designs Rings to Stop You From Netflix Adultery (NFLX)

    U.K. ice cream maker Cornetto released commitment rings that promise to stop your partner from watching your favorite Netflix shows alone.
  1. What is the difference between marginal benefit and marginal cost?

    Understand the difference between marginal benefit and marginal cost. Learn how and why both marginal cost and marginal benefit ... Read Answer >>
  2. What is the history behind the opening and closing bells on the NYSE?

    Similar to the school bells that most of us heard during our school days, the New York Stock Exchange's (NYSE) opening and ... Read Answer >>
  3. Are stocks real assets?

    Learn why stocks are classified as financial assets, not real assets. Understand the properties that determine whether an ... Read Answer >>
  4. Which consumer goods do Americans buy the most of?

    Explore the various factors that influence estimations of a tangible asset's useful life, as well as standard estimations ... Read Answer >>
  5. Are current assets liquid or capital?

    Take a deeper look at liquid current assets for businesses and individuals, and learn how they differ from other types of ... Read Answer >>
  6. Are qualified retirement plans protected from creditors?

    Learn how to protect your retirement assets from creditors. Certain provisions provide for exemption of retirement assets ... Read Answer >>
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center