Another point. I have read somewhere that if you take the route of avoiding funds altogether and just investing directly in shares, then you must be careful that the company you invest in is not a PFIC. For example, Shell invests its cash in 'active' activities like oil exploration and makes its own decisions on how it does it, so Shell is not a PFIC. But Lloyds Bank invests its cash in other companies or mortgages held by third parties who in turn make the investment decisions - so Lloyds is a passive investor in those companies and hence a PFIC. So in general, banks, insurance companies and similar are PFICS.
As usual, remember that I am not an expert - so this is just my interpretation.
