Key takeaways:
- The RIF is a much-anticipated addition to the UK investment funds toolkit and will be available from 19 March 2025.
- It has been designed to facilitate investment by institutional and professional investors in illiquid assets, including real estate.
- It takes the form of an unregulated contractual scheme and is an alternative investment fund (AIF) for regulatory purposes.
- It is seen as a flexible, cost-effective, tax-efficient and quick-to-market UK onshore alternative to similar offshore investment structures.
- Its introduction forms part of a broader strategy by the UK Government to enhance the UK’s appeal as an investment hub.
WHAT is a RIF?
The Reserved Investor Fund (RIF) is a new UK fund regime, which will be available to the market from 19 March 2025.
As a contractual scheme, the RIF will be governed by a contract entered into between its investors (unitholders), the manager (which must be a regulated alternative investment fund manager) and the depositary. The RIF is not a legal entity and will therefore not have separate legal personality. In these respects the RIF bears similarities to structures already in existence in other jurisdictions, for example Jersey / Guernsey property unit trusts and the Luxembourg FCP (fonds commun de placement).
The RIF’s introduction is part of a wider review undertaken by the UK Government to enhance the UK's attractiveness as a hub for fund and asset management. Other measures taken include the introduction of the long term asset fund (LTAF) and recent relaxations to the requirements of the UK real estate investment trust (REIT) regime.
HOW will the RIF be treated for tax purposes?
Provided the relevant conditions are met, the RIF is expected to offer the following tax features:
- Transparency for UK income tax purposes;
- Exemption from UK tax on chargeable gains, with investors being subject to tax on disposals of units in the RIF (subject to their status);
- Free from UK stamp / transfer taxes on transfers of RIF units (i.e. secondary trades);
- Opaque for UK stamp duty purposes (i.e. investors in the RIF will not bear SDLT on transfers by the RIF of underlying property or SDRT on transfers by the RIF of underlying shares);
- Seeding relief available for investors on the in specie contribution of certain assets (e.g. property / shares) into the RIF.
Similar to certain qualification conditions for the UK REIT regime, the RIF must either have genuine diversity of ownership or be controlled by certain qualifying institutional investors.
WHY is the launch of the RIF Significant?
The RIF is seen as a valuable and timely addition to the UK funds toolkit for a number of reasons:
- As an unregulated scheme, the RIF will offer a quicker route to market than authorised UK vehicles, such as the authorised contractual scheme (ACS), LTAF and property authorised investment fund (PAIF).
- The RIF can accommodate closed, open and hybrid structures and permits flexibility in fund terms (including with respect to investment mandate, leverage and fees).
- As a fully onshore UK structure, the RIF is expected to reduce the incentive for managers to domicile and manage vehicles from offshore, which in turn will have operational, cost-saving and environmental benefits (although in contrast to offshore unit trusts, the RIF is not suitable as a special purpose vehicle for real estate investments).
- The RIF’s introduction comes amidst a challenging market, with factors including yield compression and the much-publicised decline in defined benefit (DB) pension scheme investment having left the industry searching for new means of stimulating investment into UK private assets.
WHO can I contact for more information?
For more information on the RIF and how this might form part of your investment portfolio, please speak to one of our Funds specialists.
