FSA Paper Gives Boost To UK Onshore Hedge Fund Industry

by Carla Johnson, Ivestors Offshore.com

15 October 2004

According to a report by Institutional Investor magazine, the UK fund industry has been given a major boost with the revelation that a Financial Services Authority consultation paper is paving the way for onshore hedge funds to be sold through an UCITS wrapper.

The UCITS wrapper (Undertakings for Collective Investment in Transferable Securities) is advantageous as it allows a fund registered in one member state of the European Union to be sold in other member states with minimal additional regulations.

The FSA paper is based on an earlier European Commission recommendation and the UK will be one of the first member states to implement the plan, in April next year, possibly giving the UK fund industry a headstart over its neighbours.

However, some experts continue to warn that uncertainty surrounding the tax treatment of onshore hedge funds by the Inland Revenue may hinder growth in the industry in the UK.

Responding to a recent Inland Revenue discussion paper on the issue, the Alternative Investment Management Association last month said ongoing tax uncertainty would deter its members from participating in the FSA scheme.

“Without changes to the current UK tax regime, especially with uncertainty as to taxation treatment of ‘trading’ income, the establishment of such funds in the UK is unlikely to be attractive to AIMA’s members,” the group warned.

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