The UK government has given the green light to real assets fund managers to launch a new kind of onshore vehicle aimed at investing efficiently in illiquid assets next month.
Secondary tax legislation for the reserved investor fund (RIF) has been laid in Parliament, opening up the structure from 19 March for new real estate, infrastructure and other types of private-markets funds.
The RIF is expected to be particularly relevant to UK-based real estate fund managers, which traditionally have domiciled closed-ended funds offshore. Several managers, including Newcore Capital, are expected to convert existing funds to RIFs or to launch new vehicles outright.
The Association of Real Estate Funds (AREF), which has previously supported the creation of the RIF, welcomed the news.
Paul Richards, CEO of AREF, said: “Fund managers and their underlying clients tell us they want more options to invest in UK property – from hotels to housing – and they’d like to do it without having to go offshore. The RIF gives them that option, and we’re not surprised to see many of our fund manager members planning RIFs in future or eyeing the opportunity closely. This is a big moment for the UK funds industry.”
The RIF’s proponents say it is designed to be tax-efficient and transparent. Purchases of RIF units will be exempt from stamp taxes, helping to reduce the incentive for real estate fund managers to structure vehicles offshore. It is also designed to be cost-effective and flexible enough to hold a range of illiquid real assets, including commercial property, housing and social infrastructure, to provide liquidity through quarterly redemptions.
Specialist lawyer Melville Rodrigues, the original proponent and architect of the RIF, said the fund structure would act “as a conduit to attract capital and facilitate growth – the number one mission of the UK government”.
Rodrigues, head of real assets advisory at Apex Group and a member of the AREF public policy committee, said: “This new fund can act as a valuable new economic catalyst by creating jobs, accelerating the development of our nation’s infrastructure, facilitating the regeneration of our town centres and furthering sustainability strategies. I am very grateful for the officials’ constructive engagement with, and widespread industry support for, the RIF proposal. It is exciting to see several fund managers, large and small, warming up for the launch.”
Anne Copeland, head of institutional capital at Newcore Capital, a firm that plans to launch a RIF, said: “I would like to praise Melville Rodrigues for his unwavering drive and persistence. The RIF is capable over time of having meaningful impact, benefiting investors, society, and the environment.”
Emma Cullen, chief operating officer at another real estate fund manager, Feira Real Estate, said: “The RIF is a much-anticipated onshore offering. As the UK fund landscape evolves, investor-focused developments of this nature which will provide cost-effective and tax-efficient structuring (particularly for secondary trades) will be of interest to institutional investors and particularly local government pension schemes.”
Richard Tomlinson, deputy CIO of London Treasury Limited, an institutional investor, said: “It is high time that investors and fund managers had an efficient UK investment vehicle available to them, avoiding costly arrangements in other jurisdictions and many unnecessary air-miles. If the RIF can deliver this, it is indeed good news.”
Anne Breen, global head of real estate at Abrdn and chair of AREF, said: “As a nation we have acute social and economic challenges – and what they have in common is a need for meaningful investment. Today’s news will unlock some of that investment, making it easier for organisations like defined contribution pensions to direct their savers’ money into deserving and financially viable opportunities, bringing benefits to all parties.”
Other associations threw their weight behind the decision of the UK government to proceed with the RIF. Casper Hesp, CEO of European Association for Investors in Non-Listed Real Estate Vehicles (INREV), said: “We’re pleased that [the UK Treasury] has published the secondary legislation necessary to launch the RIF this spring. INREV has been a strong supporter of this initiative from the beginning and envisages the RIF quickly becoming a UK-domiciled fund vehicle that institutional investors will find very attractive.”
Dan Gallon, assistant director, head of taxation at the Association of British Insurers, said: “The launch of the new RIF structure is a welcome step for the UK and will help the insurance and long-term savings sector as investors. The availability of UK-based funds which provide commercial and regulatory flexibility, while being internationally competitive, is crucial for a strong UK financial services sector.”
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