The Treasury last month closed a consultation into plans to replace common investment funds and common deposit funds with a new type of fund with a different regulatory structure. But the plan has not proved popular with investment managers.
The common funds are themselves charities and only other not-for-profit organisations can invest in them. They are regulated primarily by the Charity Commission. The proposal is to replace them with a new non-charitable vehicle, the charity authorised investment fund, regulated by the Financial Services Authority but still open only to the voluntary sector.
Michael Quicke, chief executive of CCLA, which manages assets for 45,000 charitable investors, is one of many people who foresee problems with the new structure.
"In principle, we have no problem with the change in regulator," he says. "It's clear that the commission does not want to manage these funds any more. But we do not believe the new CAIF structure offers any benefit to the sector."
He says the changes might bring large tax bills for charities, and that governance changes could lead to a £60m-a-year rise in investment management charges. "We also believe it would cause a lot of extra administration for existing investors," Quicke says. "This proposal would save a little bit of work for the FSA, but it would cause an enormous amount of difficulty for everyone else."
Other charity investment specialists also have concerns about the regime. The Investment Managers Association said in its response to the consultation that the proposed process could "shoehorn existing CIFs and CDFs into an operationally unworkable regime".
Julie Patterson, director of tax and authorised funds at the IMA, says: "We understand that the commission isn't in a situation to carry on with the regulation. But charities could lose out because of the new regime, and we don't feel that should be the case."
The IMA has warned that the Charity Commission will not be able to wash its hands of the management of specialist charity investment funds, even if the proposal to introduce CAIFs does go ahead.
Individual investment managers agree. "We feel that the commission has to remain involved," says Katie Delacombe, vice president of UK institutional business at JP Morgan. "These new organisations will have to follow CC14, the commission's investment guidance. We feel the new structure should be regulated by the FSA but registered with the commission."
The Charity Commission, which is working with the Treasury on the consultation, says a summary of responses will be produced "shortly".