The UK’s biggest property fund managers are pressuring platforms to restructure their systems to accommodate property authorised investment funds.
A Paif is a tax-efficient investment vehicle that allows funds to pay gross dividends from property rental income with no corporation tax deducted.
Funds without the structure suffer a 20 per cent corporation tax on their taxable income that cannot be recovered.
The Association of Real Estate Funds has set up a working group to look at converting existing recognised property funds into the tax-efficient structure. It includes Aviva Investors, Henderson Global Investors, Ignis Asset Management, Legal & General Investment Management, LV= Asset Management, M&G Investments, Scottish Widows Investment Partnership, Skandia Investment Group and Threadneedle Asset Management.
Aref chief executive John Cartwright (pictured) says if the investment firms convert their property funds into Paifs, most platforms will have to adapt if they want to include the funds.
Paifs pay out via three income streams, interest, property rent and dividends, a process most platforms cannot accommodate.
Nucleus chief executive David Ferguson says: “We are looking at Paifs at the moment but it is likely to be 2012 by the time they are available.”
Avalon director Harry Kerr says: “It will not be a huge problem for us but platforms with older technology and higher volumes of business might struggle.”
Fidelity International head of UK fund partners Ed Dymott says: “It will be about a year before Paifs are available on Fidelity FundsNetwork. A lot of consultation is still needed.”
Skandia head of proposition marketing Graham Bentley says: “We have no immediate plans to accommodate Paifs but it is something we are looking at as part of the overall development of our platform.”
Ascentric is one of the few platforms that is already accommodating Paifs. Man-aging director Hugo Thorman says: “Our platform is a stockbroking platform based around equities rather than funds.”