Property boutique aims for first low-tax fund launch
Clavis Walden, a real estate boutique started earlier this year, will be the first to launch a new type of tax-efficient property fund that could draw substantial assets away from the UK’s biggest property funds.
The company has filed an application to launch a Property Authorised Investment Fund with the UK Financial Services Authority. Existing open-ended property funds pay tax on some income such as rent, which institutions are unable to claim back due to tax rules, but eligible investors in a PAIF will be able to claim back such tax and effectively increase their returns.
Iain Keys, managing director at Clavis Walden, said the proposed fund had received “very encouraging” feedback: “We have had a number of meetings with investors, and the feedback has been very positive.”
In onshore authorised funds, a fifth of their potential income can be lost through tax, according to Michael Barrie, director of balanced funds at Legal & General Property. As a result, most institutions invest in offshore property funds, but existing onshore funds still depend heavily on institutional investment.
Deborah Lloyd, a partner in the indirect investment team at law firm Nabarro, said: “The fund managers who already have onshore authorised funds are going to be under pressure because their funds will look less attractive to institutional investors.”
Asset managers including Aviva Investors, Standard Life Investments and Henderson Global Investors run large authorised property funds, which hold substantial portions of institutional money.
Chris Laxton, managing director of global business development for real estate at Aviva Investors, said: "PAIFs are only more tax efficient for some investors and in our case a relatively small number.
"We will be keeping it under review, but have no plans to switch any existing funds at this time"
Standard Life declined to comment. Henderson did not return requests for comment.
The Clavis Walden fund is expected to raise tens of millions of pounds in its first year, according to Keys. It could launch next month, pending regulatory approval.
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