Treasury consults on new "Reserved Investor Fund"

Following its earlier review of the UK's fund regimes, HM Treasury has launched a consultation on introducing a new unauthorised contractual scheme known as a Reserved Investor Fund (Contractual Scheme) ("RIF(CS)").

The new structure aims to target a gap in the UK for a contractual scheme open to professional and institutional investors, but without any authorisation requirements and consequently not open to retail investors. While RIF(CS)s will be open to all asset classes, they are expected to be particularly attractive to commercial real estate investors. 

However, HM Treasury is consulting on potential restrictions in a RIF(CS) in order to ensure there is no risk of loss of tax from non-UK resident investors on disposal of UK property. In particular, the Treasury is consulting on various restrictions to the investor base and asset base. 

Even though the schemes themselves will be unauthorised, the Treasury is consulting on the proposed "RIF(CS)" branding on the basis that fund managers will require authorisation or registration with the FCA under the UK's implementation of AIFMD.

HM Treasury is also seeking views on applying the same restrictions as currently apply to authorised contractual schemes, so prohibiting sale except to professional investors or investors who purchase units for a minimum payment of £1 million. The Treasury also notes that the RIF(CS) will be a non-mass market investment under the FCA's rules on high-risk investments. 

Together with the above regulatory issues, the Treasury is also consulting on a range of tax issues in relation to the proposed RIF(CS). 

HM Treasury's consultation closes on 9 June 2023.