Royal London Asset Management (RLAM) has become the first British fund management group to launch a Property Authorised Investment Fund (Paif), following the conversion of its Royal London Exempt Property unit trust.
In February Clavis Walden announced the launch of what would have been Britain’s first Paif, the Piccadilly UK Commercial Property Income fund.
However, it was last month forced to delay the launch as the fund had not reached its target size of £25m.
In April, CB Richard Ellis Investors (CBRE), a global real estate investment management firm, announced the launch of a second Paif, the CB Richard Ellis UK Property fund. However, as the fund not yet launched, RLAM is effectively the first group to go live with a Paif, even though it is a fund conversion and not a brand new fund.
Paifs, which were introduced by the Financial Services Authority (FSA) in 2008, are the open-ended equivalent of a real estate investment trust (Reit). (article continues below)
Authorised investment funds investing in real estate suffer a 20% corporation tax charge on their taxable income that cannot be recovered. However, because of their Paif structure, these funds can pay gross dividends from property rental income without the deduction of corporation tax.
According to a statement from RLAM, the investment objective and policy of the Paif remains similar to the existing fund, investing in a broad spread of commercial properties across Britain. As a result, the fund will maintain its existing performance track record.
Nick Preston, the senior director and manager of the CB Richard Ellis UK Property fund, says it is “close” to launching. The group’s goal is a portfolio with £1 billion under management.