Charity Commission introduces model schemes for common investment funds

But Jane Hobson of the watchdog says this is not an endorsement of CIFs and charities must still establish if this form of investment is in their interests

Jane Hobson
Jane Hobson

The Charity Commission has introduced two new model schemes for setting up common investment funds.

CIFs are collective charity investment funds that only charities can take part in.

In the summer, the commission ran a consultation on changing the model for setting up CIFs.

That move came because a European Union directive, the Alternative Investment Fund Managers Directive, came into force in July 2011, meaning that the regulations governing fund managers of CIFs had to change.

The regulator has the power to establish CIFs as charities but regulates them only as charities. The performance of the investment funds is regulated by the Financial Conduct Authority in its role as regulator of the managers of alternative investment funds.

The commission said in a statement that it would establish new CIFs using only the two model schemes, one of which is designed for CIFs with boards and the other for those without.

It said that it would first consider whether the investment fund would be more properly created as an authorised investment fund – it said charity investors were entitled to the protection that investment in an authorised investment fund provided because they are subject to a more extensive regulatory regime under the FCA.

But Oliver Bates, a partner in the asset management company Sarasin and Partners and a member of the Charity Investors’ Group, said this change could signal the end of new CIFs.

He said the move implied that the commission believed "any new CIF would have to be able to demonstrate substantively why it should not be an authorised investment fund".

The commission statement said that existing CIFs could amend their current schemes in line with the revised models published today.

They could do this without permission from the commission, the regulator said, unless changes were made in relation to remuneration of charity trustees or to objects.

Jane Hobson, head of policy at the Charity Commission, said the consultation process, which attracted 11 responses, was "extremely helpful" and there was a consensus from respondents that CIFs were useful investment vehicles.

"However we must stress that registration with us is not an endorsement of the CIF as an investment product," she said. "Trustees must still carefully consider whether the investment is in the best interests of their charity."

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