Press Release

FUNDS OF ALTERNATIVE INVESTMENT FUNDS ("FAIFs") - UK LAUNCH DATE MOVES CLOSER

The Investment Management Association (IMA) welcomes today's announcements by HM Treasury and the FSA on Funds of Alternative Investment Funds (FAIFs), which will enable UK authorised funds to be invested in a wider range of underlying funds, with appropriate investor safeguards.

The FSA has taken on board IMA's earlier comments to allow for flexibility in fund structure alongside the necessary investor protection measures.  The FSA is now seeking comments on a couple of detailed follow-up issues, including its welcome strengthening of the "due diligence" requirements which IMA had called for in the interests of investor protection. 

The tax treatment of such vehicles is also crucial, as without the necessary changes to the existing tax regime for authorised funds investors would have found UK FAIFs unattractive compared with offshore equivalents.  Therefore IMA welcomes today's Treasury announcement that it will introduce a new, elective tax regime for FAIFs, which will improve the position of UK funds invested in offshore "non-distributing" funds, such as hedge funds.

Moreover, the Treasury recognises that the new framework is suitable only for a FAIF predominantly invested in non-distributing offshore funds and commits to considering how the new regime may be adapted to accommodate funds investing in a mixture of funds.

The FSA is also consulting on a rule amendment to enable authorised property funds to take advantage of a new tax regime. 

Julie Patterson, Director of Authorised Funds & Tax at the IMA, commented:

"Today's announcements are the culmination of much hard work by the authorities and the IMA.  They are good news for product innovation and investor choice, and are therefore good news for the UK's position as a serious fund domicile.  We shall continue to work closely with the FSA, HM Treasury and our member firms to ensure that these changes are implemented as swiftly as possible and to further the discussions on an improved tax position for a wider range of fund of funds."