Retail investor access to funds of hedge funds has moved a step closer with the announcement from th...
Retail investor access to funds of hedge funds has moved a step closer with the announcement from the UK's Financial Services Authority that it intends to pursue its aim of introducing regulated funds of alternative investment funds (Faifs).
The FSA has been consulting on plans to increase access to hedge funds for several years, but first introduced the Faif idea in March last year.
A further round of consultation is now under way and is set to run until May 22, after which the FSA will then finalise the draft rules in light of the responses and publish a policy statement giving feedback towards the end of the year. This will set out the finalised rules for Faifs as whole and the date on which they will come into effect.
The FSA is keen to stress that Faifs are not a completely new structure, but will fall under the non-Ucits retail scheme (Nurs).
One of the sticking points in the Faifs consultation to date has been their tax treatment, as under present rules any gains would be taxed as income whether they were crystallised or not. The Treasury has indicated it is willing to change this so that a chargeable event only occurs when an investor makes a redemption.
Commenting on the news, Andrew Lodge, director of fund of hedge funds provider Nedgroup Investments, said: "This is a welcome development. Hedge funds were previously restricted to institutions and high net worth investors, and it is right that retail investors should get access to these vehicles. It is right that the FSA is recommending it authorises funds of hedge funds rather than single-manager funds - it is all about risk diversification and consumer protection, and we welcome that."
The Investment Management Association also welcomed the move. Julie Patterson, director of authorised funds and tax at the IMA, commented: "This is good news for product innovation and investor choice, and 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."
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