Authorised investment funds (AIFs)—what are they?
Produced in partnership with Camilla Spielman of Eversheds Sutherland
Authorised investment funds (AIFs)—what are they?

The following Tax guidance note Produced in partnership with Camilla Spielman of Eversheds Sutherland provides comprehensive and up to date legal information covering:

  • Authorised investment funds (AIFs)—what are they?
  • Regulatory framework—collective investment schemes
  • Regulatory framework—authorisation and regulation of collective investment schemes
  • The different legal forms—overview
  • The different legal forms—authorised unit trusts (AUTs)
  • The different legal forms—open-ended investment companies (OEICs)
  • Tax treatment of AIFs and their investors
  • Unit classes
  • Umbrella funds

An authorised investment fund (AIF) is a variety of collective investment scheme (CIS). It is important to understand what a CIS is before considering authorised investment funds in greater detail.

Note that the term ‘authorised investment fund’ (AIF) is a tax one—it appears in the tax regulations which set out most of the key rules applicable to the taxation of these forms of CIS.

Regulatory framework—collective investment schemes

A CIS is defined in the Financial Services and Markets Act 2000 (FSMA 2000) as:

'any arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.'

Based on this definition (which is expanded further in FSMA 2000 and in supplementary regulations), the fundamental characteristics of a CIS are:

  1. pooled investment—ie the contributions of the participants, and the profits or income out of which payments are made to them, are pooled

  2. professional management—ie participants in the scheme do not have day-to-day control over the management of the property held by the fund, and

  3. spreading of investment risk—ie the range