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SLI UK Property converts into Paif

Standard Life Investments has become the latest firm to convert a portfolio into a property authorised investment fund.

The group has changed Nigel Chapman’s £471m UK Property fund from an authorised unit trust to an open ended investment company with a tax-efficient Paif structure after the plan won unanimous support from unitholders at an EGM earlier this month.

Chapman will continue to manage the portfolio and there will be no change to the fund’s name, investment strategy, risk profile or objective. However, its estimated distribution yield will increase from 3.61 per cent to 4.52 per cent for qualifying investors.

SLI head of wholesale and listed real estate Andrew Jackson says: “Investors are attracted to commercial real estate because of the income yield it offers. Getting more of that income back into the hands of eligible investors without altering the risk profile of the fund can only be a good thing.”

The Paif structure, which was introduced in 2008, allows tax-exempt investors to receive income from the fund gross of the 20 per cent corporation tax previously applied to income.

A number of fund groups are looking at converting their property funds into Paifs, with M&G making the move on Fiona Rowley’s £2.2bn M&G Property Portfolio at the start of the year. However, most platforms are unable to deal with the more complex income streams generated by Paifs, which has held back their spread.

Whitechurch Securities head of investment research Ben Willis says: “Property does yield and the demand from investors at the moment is for income so this structure does make that asset class more attractive.”

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