For immediate release: Tuesday 27 March 2007 

FUNDS OF ALTERNATIVE INVESTMENT FUNDS - GOOD NEWS FOR PRODUCT INNOVATION

The Investment Management Association (IMA) welcomes the proposed inclusion of funds of alternative investment funds (FAIFs) in the existing NURS regime.  It is right that appropriate safeguards are also being suggested to ensure that investors understand the nature of FAIFs and their associated risks. 

The tax treatment of such vehicles is also crucial.  The Offshore Funds Regime (OSFR) has a direct impact on the tax treatment of such funds given that they will be potentially investing in non-UK funds.  Following the government's recent announcement that it will review the OSFR we would urge HMRC to take account of the development of FAIFs in that review.  Otherwise this innovation will be in vain.   

Sheila Nicoll, Deputy Chief Executive of the IMA, commented:

"The FSA is showing a clear commitment to product innovation.  This is good news for investors who will benefit from this innovation and also greater competition and choice.  The one remaining obstacle is the tax treatment of FAIFs - this needs to be addressed in order for retail investors to find them an attractive proposition." 

The FSA's consultation paper can be found at http://www.fsa.gov.uk/pubs/cp/cp07_06.pdf.  

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For further information, please contact:
Mona Patel, Head of Communications , IMA, 020 7831 0898

Out of hours contact:
Mona Patel, Head of Communications, IMA, 07834 089332

Notes to Editors:

1. The FSA Consultation Paper 7/6 on Funds of Alternative Investment Funds (FAIFs) proposes to:

• Introduce retail-orientated funds of alternative investment funds into the existing non-UCITS Retail Scheme (NURS) regime;
• Lift the existing 20% investment restriction into unregulated collective investment schemes for NURS, thereby allowing the development of funds of alternative investment funds (FAIFs);
• Apply due diligence criteria for fund managers producing FAIFs;
• Leave the current rules unchanged for existing NURS, although the FSA believes that there may be some consequential changes needed to ensure overall consistency within the regime; and
• Ensure that the Qualified Investor Scheme (QIS) regime follows the FSA's revised approach for NURS.