Fencing in investment is a proactive and protective action to divide any assets in an asset allocation plan. In many cases, offshore banking is also referred to as ring fencing assets. As the name suggests, ring fencing is used to divide any financial assets between the different parties involved in the financial transaction. It is a process that is designed to prevent any future disputes arising out of an unforeseen financial loss of control of any assets. More generally, ring fencing can protect some part of financial assets against any uncertainties.
Fencing in asset allocation refers to the separation of various assets or financial resources. This may be done in order to prevent any future disputes arising out of financial losses in the future. The separation could be done by transferring the different assets to another person or group of people who will act as custodians of the assets in case of any dispute arising out of financial problems in the future. The use of ring fencing is also meant to protect the interests of all the different parties involved in the agreement to avoid any conflict of interest or any sort of unjust enrichment which may arise out of the agreement. Another possible use for ring fencing is to prevent any one party from gaining an unfair advantage over the other parties in the agreement. Fencing in investment is mainly a defensive process that helps to prevent or to minimize the risk of future claims in the event of a dispute.
The use of ring fencing in investment involves dividing and partitioning of financial assets in the form of security or legal rights. The separation can be based on anything that may help to minimize the risk of future conflicts. Some of the major uses of ring fencing are seen in the field of commercial ventures where the rights to the assets are separated based on the location of the assets. Similarly, in other industries, different parts of the assets like the machinery and equipment are separated.