Treasury consultation opens on charity investment funds

Common investment funds and common deposit funds could be abolished and replaced by new fund regulated by Financial Services Authority

The Treasury has launched a consultation on the future of specialist charity investment funds.

The key proposal in the consultation, launched yesterday, is that the main types of charity investment fund – common investment funds and common deposit funds – should be replaced by a new type of fund: the charity authorised investment fund.

This new type of fund would be regulated by the Financial Services Authority rather than the Charity Commission, the document says.

The proposals would lead to charities receiving the protection of the FSA's existing authorised fund regime, and would remove duplicate supervision and monitoring carried out by the FSA and the Charity Commission.

The new charity investment funds would not be charities themselves, but would retain the same tax advantages currently enjoyed by CIFs and CDFs.

"The economic world around us has changed considerably in recent times," said Andrew Hind, chief executive of the Charity Commission. "It's more important than ever that regulatory reform in practice continues to meet the needs of charities investing to fund their vital work."

The consultation will run until 31 October.

Which funds will be affected?

The main funds affected are common investment funds and common deposit funds.

Common investment funds are investment funds that allow charities to buy units in a scheme together with other charities, rather than purchasing an individual investment portfolio. They are similar to unit trusts.

Common deposit funds allow charities to put cash on deposit into a common fund that acts as a charity itself, investing charities' cash as a block to earn higher rates of interest.

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