The Charity Investors Group, Charity Law Association and Investment Association announced the long-awaited launch of the Charity Authorised Investment Fund structure on 12 October 2016.
A Charity Authorised Investment Fund (a "CAIF") is a new investment vehicle for charities, designed to offer additional benefits to charities and charity investors compared with the existing Common Investment Fund (a “CIF”).
Charity Authorised Investment Funds, like CIFs, will be registered charities, allowing them to take advantage of the tax benefits offered to charities, and benefit from the oversight of the Charity Commission with respect to their charitable status. However, they will also be authorised as investment funds by the Financial Conduct Authority, offering better regulatory protection to investors.
Additional features of CAIFs include the ability to smooth income returns to charity investors to create a steady income, and the presence of an independent advisory committee to represent charity unitholders. Importantly, the structure will also be able to take advantage of a VAT exemption for FCA authorised funds, meaning that VAT will not be payable on investment management fees. It is hoped that this will lead to significant savings for charities over time.
In order to convert an existing CIF to a CAIF, it will be necessary to set up a new CAIF and transfer investments from the existing CIF to the new CAIF.
Experience suggests that investment managers wishing to manage this process will need to think carefully about:
- the timetable for any reorganisation
- the sequencing of the different steps
- the need for consultation with or notification to investors and the time period and content of communications
- the need for discussion with other parties which play a governance role in the fund
- the constitutional processes which will need to be followed and the resolutions which will need to be passed to approve any reorganisation
- all associated charity law and financial services regulatory considerations
At BWB, we have been following the development of the CAIF with great interest and have prepared a variety of practice notes on these and related topics. If you would like advice on how to establish a CAIF, reorganise a CIF or on what this might mean for you, please feel free to get in touch.
Partner & Head of BWB Compliance
- +44(0)20 7551 7876
Posted on 12/10/2016 in Legal UpdatesBack to Knowledge