New rules that take effect 6 March will allow UK retail consumers to invest in hedge funds and other alternative investments, as part of an effort by the Financial Services Authority to expand investment options and risk diversification.
The FSA said last week that it is introducing “Fund of Alternative Investment Funds”, a type of non-UCITS scheme that may be marketed to retail investors. According to law firm Kaye Scholer, while FAIFs are subject to the usual investment restrictions, they will operate under a more relaxed regime. For example, FAIFS can invest up to 100 percent of their assets in other collective investment schemes or in a single master scheme.
The Investment Management Association said last week that it welcomed the new rules, as they incorporated previous comments by the IMA about the need for allowing flexibility in fund structure.
At the same, the FSA has also built in additional consumer protection measures, such as requiring an FAIF manager to carry out initial and ongoing due diligence to determine that the assets of the underlying fund managers are held by an independent third party. The valuation of a firm’s NAV and its accounting records must also be segregated from the scheme’s investment management process.
The FSA also amended an earlier proposal to use existing repayment standards – including payment for a redeemed unit within four business days following redemption – after receiving feedback that such a plan would have made the operation of FAIFs unworkable. Instead, fund managers will now have up to 185 days to pay redemptions, but they must clearly explain their redemption procedures to investors.
If you do not receive this within five minutes, please try to sign in again. If the problem persists, please email: