The UK government is consulting industry on the creation of a reserved investor fund (RIF), a proposed closed-ended vehicle for non-retail investors that could be attractive to UK-based institutional real estate fund managers.
The consultation appears to respond to calls from the real estate industry to close “a gap in the UK’s existing funds range” and provide an alternative to the offshore structures often used by real estate fund managers.
In February 2022, as part of plans to reform the UK funds regime, the government said it would “explore options” to introduce “internationally attractive onshore professional investor regime of unauthorised fund structures”.
The government is seeking comment on whether it should introduce the RIF, along with several questions including those relating to tax, eligibility and notification criteria, and branding.
It would be aimed at professionals, including high-net-worth retail, and institutional investors, and could see the creation of new vehicles next year.
Paul Richards, managing director of the Association of Real Estate Funds (AREF), said: “Unlocking more investment in essential real estate and real asset investments is a crucial part of realising government ambitions in levelling up and greening the economy, and this consultation is an important step towards those ends.
“There are northwards of £3trn (€3.39trn) in UK institutional funds alone, and allocating even just a very small proportion of those to essential investments is likely to have a materially positive effect.”
Jeff Rupp, director of public affairs at the European Association for Investors in Non-Listed Real Estate (INREV), said the proposed structure “would give institutional investors the choice to use a UK-domiciled closed-end fund”.
He said: “The RIF could be particularly helpful for funds investing in UK real estate. We’ve been urging UK government officials to create such a vehicle for some time and look forward to working with HM Treasury as the proposal moves forward.”
Melville Rodrigues, head of advisory, real assets at Apex Group, and key architect and the lead advocate of the new fund structure, said the RIF would “plug an important gap in the UK’s fund offering” and the “consultation signals that, subject to consultation feedback, UK fund managers could begin to launch RIFs from April 2024.”
He said there was an opportunity for the UK RIF to “become a recognised global brand” that could compete with the likes of Luxembourg’s Reserved Alternative Investment Fund (RAIF).
“A whole spectrum of UK fund managers – from SMEs to larger firms – will be entitled to benefit from the efficiencies of the RIF. Managers will avoid having to go offshore with all the challenges, inefficiencies – and costs – of dealing with multiple legal, tax and regulatory regimes,” Rodrigues said. “The RIF enhances the UK’s status as an international funds centre.”
He added: “The RIF can be a conduit to help level up the nation, directing institutional capital, for example, into affordable housing and town-centre regeneration projects, as well as accelerating our nation’s infrastructure and green industrial revolutions”.
The consulation ends on 9 June 2023.
To read the latest edition of the latest IPE Real Assets magazine click here.