[F1809FZOFunds of fundsU.K.
(1)Section 809FZC(5) (disregard of intermediate holdings and holding structures) does not apply to an investment made for the purposes of a fund of funds in a collective investment scheme (and, accordingly, such an investment is regarded as an investment in the collective investment scheme itself).
(2)Subsection (1) does not apply in relation to a fund of funds in relation to a collective investment scheme if it is reasonable to suppose that the main purpose or one of the main purposes of the making of any investment in any collective investment scheme for the purposes of the fund of funds is to reduce the proportion of carried interest arising to any person which is income-based carried interest.
(3)Where by virtue of subsection (1) a fund of funds has a significant investment in a collective investment scheme (“the underlying scheme”)—
(a)any qualifying investment made for the purposes of the fund in the underlying scheme after the time the significant investment was acquired is to be regarded as having been made at that time, and
(b)any disposal for the purposes of the fund of a qualifying investment in the underlying scheme after that time is to be regarded as not being made until a relevant disposal is made.
(4)In subsection (3)(b) “relevant disposal”, in relation to an underlying scheme, means a disposal which (apart from subsection (3)) has the effect that—
(a)the fund of funds has (by virtue of disposals of its interest in the underlying scheme) disposed of at least 50% of the greatest amount invested for its purposes at any one time in the underlying scheme, or
(b)the fund of fund's investment in the underlying scheme is worth less than whichever is the greater of—
(i)£1 million, or
(ii)5% of the total value of the investments made before the disposal for the purposes of the fund of funds in the underlying scheme.
(5)In this Chapter, “fund of funds” means an investment scheme in relation to which the condition in subsection (6) is met.
(6)The condition is that when the scheme starts to invest it is reasonable to suppose that over the investing life of the scheme—
(a)substantially all of the total value invested for the purposes of the scheme will be invested in collective investment schemes of which the scheme holds less than 50% by value,
(b)more than 50% of the total value invested for the purposes of the scheme will be invested in investments which are held for 40 months or more, and
(c)more than 75% of the total value invested in the scheme will be invested by external investors.
(7)In determining whether subsection (6)(b) is met in relation to an investment scheme, apply the rule in subsection (3) to the scheme.
(8)In this section, “significant investment”, in relation to a collective investment scheme, means—
(a)an investment of a least £1 million in the scheme, or
(b)an investment of at least 5% of the total amounts raised or to be raised from external investors in the scheme.
(9)In this section, “qualifying investment” means an investment made for the purposes of an investment scheme in a collective investment scheme (“the underlying scheme”) where—
(a)the investment is held on the same terms as other investments made by external investors in the underlying scheme,
(b)the fund of funds, together with any connected funds, does not hold more than 30% by value of the underlying scheme,
(c)the underlying scheme has not made an investment in the fund of funds,
(d)no person providing investment management services to the underlying scheme provides investment management services to the fund of funds, and
(e)it is reasonable to suppose that the investment in the underlying scheme is not part of arrangements the main purpose or one of the main purposes of which is to reward any person involved in providing investment management services to the underlying scheme or a scheme connected with that underlying scheme.]
Textual Amendments
F1Pt. 13 Ch. 5F inserted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(2)