Charity Investment

Charity Authorised Investment Funds as an alternative to CIFs

01/02/2016

The 2015 March budget contained an announcement on the development of a new Charity Authorised Investment Fund (CAIF) structure. This followed 12 months of discussion, with the Charity Investors’ Group representing the interests of charity investors to the Treasury, the Charity Commission and the FCA, greatly helped by the Charity Law Association and the Investment Association. We are now working on the final details, including a model trust deed and a brief guide which are in the late stages of drafting and will be published in early 2016.

This new CAIF structure will improve the financial regulation of those charity funds choosing to convert from the existing unregulated common investment fund structure. It will also allow new charity specific funds to be launched, encouraging competition and enhancing choice for charity investors. An additional benefit is that authorised investment funds do not pay VAT on investment management fees, unlike common investment funds, providing a reduction in costs for charity investors.

The CAIF structure will be available exclusively to funds established for charitable purposes, enabling participating charities to carry out their purposes more efficiently. Each fund will need to be registered as a charity, and regulated as such by the Charity Commission. As authorised funds, the financial regulation will be carried out by the FCA, offering protection for the investing charities, the majority of whom would be classified as retail investors. It is
intended that CAIFs will replicate the main benefits of the existing Common Investment Fund structure – including the tax benefits of being a registered charity, the ability to smooth income to aid cash flow budgeting for investing charities, and the ability to have an independent advisory committee to represent charity unit holders.

We are enthusiastic about the new CAIF structure and intend to convert our existing Common Investment Funds as soon as the structure is available. We believe that the benefits of more rigorous financial regulation combined with a VAT exemption on fees makes the proposition compelling. It will not change what we currently offer to charity investors and the increased regulation will not translate into higher fees for our clients, indeed the VAT exemption will be a cost reduction. We intend to retain the advisory board, as key representatives of our charity investors. We are also delighted that there will soon be scope for new funds to be launched in a regulatory environment more suited to charity investors.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

Contact Cazenove Charities

Achieving your charity's investment objectives takes time and thought. To find out how we can help you please contact:

Giles Neville

Giles Neville

Head of Charities giles.neville@cazenovecapital.com
John Clifton

John Clifton

Business Development Manager john.clifton@cazenovecapital.com