Charity Investors Group and Schroders are lobbying the government for VAT to be removed from Common Investment Funds, as part of the ongoing Treasury review of the structure and regulation of CIFs.

The government began re-examining the way that collective investment schemes for charities are regulated as long ago as 2009, when it used the Budget to suggest passing regulatory duties from the Charity Commission to the Financial Services Authority.

Since then, there has been a government consultation, a delay due to a new EU Directive on Alternative Investment Fund Managers, and more recently a meeting of several large fund management firms that manage CIFs, hosted by the Treasury (pictured).

Giles Neville, head of charities at Schroders, said the general consensus at this meeting was a wish for Charity Commission to remain involved in its capacity as the charity regulator, but also a recognition that financial regulation of CIFs sits more naturally with the FSA.

Neville added: “There are a number of structural issues that would need to be worked through and we anticipate a wider consultation in due course.”

He also told civilsociety.co.uk that Schroders and Charity Investors’ Group were lobbying the Treasury for VAT to be removed from CIFs in order to be consistent with the treatment of unit trusts.

A Charity Commission spokeswoman added: “Regarding the transfer of responsibility to the Financial Services Authority – this is being considered as part of the implementation of the EU Directive on Alternative Investment Fund Managers.”

Absolute Return Trust for Charities to close

Separately, Cazenove has announced it is to wind up its Absolute Return Trust for Charities, the first and only fund of hedge funds that was a Common Investment Fund.  

Cazenove launched the ARTC back in 2002, but as familiarity with hedge fund products has grown, the investment house admits there is less need for a charity-specific hedge fund product.  So it has written to unit-holders offering an in-specie switch into the Jubilee Absolute Return Fund (JARF), managed by Fauchier.

Victoria Hayes, director of marketing and communications at Cazenove, said that JARF is a much larger fund and has a lower management fee, so Cazenove is sure that its decision is in the best interest of ARTC’s investors.

Click here to read the 2012 Pooled Funds Survey.