A regular briefing for the alternative asset management industry.
Last month, the UK government made some important announcements about its post-Brexit plans to re-vamp the funds regime. Many alternative asset managers will be disappointed that a number of industry suggestions have not (yet) been taken up.
For the last two years, the Treasury has been reviewing the UK funds regime. Its aim is to make the UK "a more attractive location to set up, manage and administer funds and to support a wider range of more efficient investments better suited to investor needs". This review had already yielded some tangible results: in particular, the recent introduction of the Long-Term Asset Fund (LTAF) and the development of a promising new tax regime for qualifying asset holding companies (QAHCs) which will come into force in April. In addition, the latest announcements confirmed that the government is taking forward a new fund structure, the Professional Investor Fund – which will be welcome news in the real estate funds industry. However, for most private fund managers, there was not much to write home about.
The government's latest publication follows a "call for input", issued in January 2021, seeking stakeholder feedback on potentially wide-ranging tax and regulatory reforms. The government received input from across the asset management sector, including from Travers Smith, with suggestions ranging from reforms to limited partnership law to recommendations for VAT on fund management fees. Having considered these responses, the government has now made clear which suggestions it will take forward – and those which it will not.
It is fair to say that a number of helpful initiatives were confirmed in the February announcements. For example, the government remains committed to work that should facilitate uptake of the LTAF. This could be a useful structure for private funds that wish to access capital from defined contribution pension schemes, insurers, and wealthy individuals but – as the government acknowledges – establishment of the structure is only the first step. The ongoing workstreams include assessment of the case for further changes to the tax rules, and regulatory reforms to facilitate distribution to a wider range of retail investors.
The declared intentions of the government are undoubtedly positive for the alternative investment funds market. Building on the UK's already world-leading financial services sector by making changes to improve the competitiveness of the tax, legal and regulatory environment is a priority.