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A New Investment Vehicle for Charities

on Friday, 13 January 2017.

October saw the launch of the Charity Authorised Investment Fund (CAIF) structure, a new pooled investment vehicle specifically for charities.

The CAIF is result of a collaboration over several years between a number of sector bodies, including the Charity Commission and the Financial Conduct Authority (FCA), with the aim of creating a structure that addresses some of the issues with existing available funds and gives more choice to charity investors.

It is designed to replicate the key benefits of the existing Common Investment Fund (CIF) structure, while overcoming some of the main deficiencies identified with these funds:

  • Like CIFs, CAIFs are registered charities so benefit from the tax exemptions and reliefs available to charities, potentially making them more cost efficient than other non-charitable structures.
  • Unlike CIFs, CAIFs are authorised funds, meaning they are regulated by the FCA as well as being subject to the oversight of the Charity Commission. There has been a concern that charity investors are on the whole not professional investors and therefore should be protected through regulation by the FCA.
  • As CAIFs are authorised investments, VAT is not chargeable on the fees paid to managers. This is not the case for CIF's where VAT is chargeable.

CAIFs have three additional features which are designed to make them particularly attractive for charity investors (and which largely mirror the position for CIFs):

  • an Independent Advisory Committee can be created, whose role is to represent the interests of the charities investing in the fund
  • CAIFs are able to hold income back from one accounting period to the next to create an 'income smoothing' effect and maintain a regular level of distributions
  • a total return approach can be operated (meaning capital gains can be distributed as well as income) where this is for the purpose of meeting a pre-determined target return

It is early days for this new structure, but it will be interesting to see how many investment managers move their existing CIFs over to the new model. As CIFs will remain in existence, there is no immediate action for their charity investors to take. However, at their next review, charities may wish to consider whether they would benefit from transferring their investments to a CAIF.


For more information, please contact Rachel Tonkin in our Charity Law Team on 0117 314 5397.