02 Jul 2020

Blog: The Professional Investor Fund (PIF) - A fund management perspective

A Case for the PIF

We are living in unprecedented times, but they are also going to be interesting times for our industry. We’ve seen the Government’s new slogan of “build, build, build” and heard the game changing initiatives for planning.  You may even have smiled at the intended “clap” for the wealth makers, the financiers and capitalists and so it leads me to the question – is this the time for the government to back the creation of a new vehicle for the fund management industry? 

My answer is a hopeful one. With BREXIT looming, one would hope that the government would be looking for more ways to give the UK’s fund landscape a competitive edge.  Historically, the UK has been slow to change its product base whilst other jurisdictions have forged ahead with successful initiatives such as the RAIF scheme in Luxembourg.  There is no tax for the government in the creation of the PIF, but if you can make UK funds more attractive, you generate more money coming into those funds which translates to more money to invest into UK property.  Arguably, on the back of COVID-19, retail being under massive pressure and falling tenant demand, why wouldn’t you support a vehicle that generates increased capital for the UK market.

Let’s look at the PIF’s structure. Whilst the PIF would be the limited partnership form of the ACS, the forerunner to all of this is the PAIF, which is great for funds of a certain size, but hasn’t proven so useful for the mid-market manager who is dealing with smaller pools of capital. The size of the required capital commitments also makes it more difficult for the smaller more entrepreneurial fund manager to get ideas to market. When the PAIF was first considered, there was a desire to switch the Channel Island JPUTs/GPUTs to PAIFS, but that simply wasn’t viable because you couldn’t seed the PAIF without incurring the stamp duty on the underlying assets.  If you could achieve the holy grail of seeding relief and improved liquidity in a vehicle that can be managed without the material expense of offshore running costs, you’re starting to create something very attractive to Investors.   It will also take us back to a simpler pre-2004 world where direct investor ownerships in LPs aren’t treated for tax purposes as direct ownerships in property. Investors will only invest in structures that work for them, they need to be prudently managed, well governed and transparent.  If you can use a vehicle which will also improve liquidity and reduce investor sensitivities, then what’s not to like.

Investor sensitivities play a significant role in determining where investors will place their capital and the PIF would address certain mounting concerns.  Some international investors are staunch advocates for not investing in funds domiciled in a jurisdiction that can be construed as a tax haven. The question which is more frequently asked now than say a year ago is “is your fund domiciled in a legitimate place to conduct business”.  A UK domiciled fund would address that concern and without the need for offshore feeders, you will positively impact your TER and bring the governance of the fund back onshore. 

It is worth mentioning that the PIF would be available not only for real estate, but also for the real asset class which includes infrastructure.  PIFs would work well for infrastructure funds – they are often close ended with transfer tax issues which arise from their ownership of large tracts of land.  I suspect that given the recent government announcements that there is likely to be more pressure to deliver infrastructure projects in a tax efficient way and the PIF could be the answer to that.

Ultimately, as an industry, we want to be as competitive as possible and to make anything we do as widely accessible as possible to both domestic and international capital.  The PIF as proposed in the AREF webinar on 2nd July, could help deliver that and I would like to see the Chancellor’s spring budget acknowledge that there is a gap in the UK fund offering and that that gap can be filled by the PIF.

View the materials from the webinar on 2nd July, including a recording here



Emma Cullen

Emma Cullen

Chief Operating Officer, UK, Fiera Real Estate

Emma is the Chair of the AREF Corporate Governance Committee. She joined Fiera Real Estate, UK in 2007 and was appointed General Counsel before broadening her role to run the operational side of the business. Emma’s remit includes oversight of regulation, risk and legal alongside the firm’s digital transformation and integration of ESG across investment and business process.  Prior to Fiera Real Estate, Emma qualified as a lawyer specialising in real estate investment management at the City firm, Frere Cholmeley Bischoff before moving to the niche real estate practice, Forsters LLP.  

Emma was a member of the AREF Corporate Governance Committee for several years before taking the role of Chair in September 2020 and joining the AREF Management Committee.