UK: Listed Funds - Change For The Better?

Last Updated: 23 February 2007
Article by Barney Hearnden and Andrew Cossar

Shortly before Christmas, the UK Listing Authority (UKLA) released a further consultation on the listing rules that apply to listed investment entities. This follows on from its original consultation in March 2006 and the UKLA claims that it has tried to take into account "concerns about the relative attractiveness of the UK regime for certain closed-ended investment funds" and the "dynamic, multi-jurisdictional capital market landscape" in which the City operates - seen by many as code for persuading funds to list in London.

What changes are proposed? And will they make any real world difference to how funds operate?

To view the article in full, please see below:

Full Article

Shortly before Christmas, the UK Listing Authority (UKLA) released a further consultation on the listing rules that apply to listed investment entities. This follows on from its original consultation in March 2006 and the UKLA claims that it has tried to take into account "concerns about the relative attractiveness of the UK regime for certain closed-ended investment funds" and the "dynamic, multi-jurisdictional capital market landscape" in which the City operates.

But despite the focus on these concerns, will the proposed changes make any difference to funds in the real world?

What are the Proposals

Offshore funds

Offshore funds will be able to use a "directive minimum" regime, based on CARD (the EU’s Consolidated Admissions and Reporting Directive), which has very few controls or investor protections built-in. Although this option has in theory been available since July 2005, fund managers have been reluctant to use it without some kind of blessing by the UKLA - which it had refused to give until recently.

  • If a fund takes up this regime, the UKLA will place it in a specific listing category so that investors know that only limited rules apply to it.

UK-based REITs and other property funds

  • Limits on property investments (for example, on concentration or leverage) are to be removed. Instead the fund will only be bound by its investment policy.
  • Existing property companies which aren’t currently treated as property investment companies will be able to transfer into the property investment category. This will mean that the company is no longer required to get shareholder consent for substantial transactions, so long as the transaction is within its published investment policy.
  • For REITs that want to be listed before the new rules are put in place, the UKLA will consider waiving the current investment limits where the REIT meets the requirements of the tax law but would breach the current rules.

UK-based private equity and hedge funds

  • The requirement that a fund must be a passive investor, and the prohibition on a fund having a controlling stake in an entity which it has invested in, are to be abolished. This will allow listed funds to adopt private equity strategies. There will still be some limits, for example on cross-guarantees between different assets owned by the fund, but these are unlikely to conflict with the typical approach taken by private equity investors.
  • Many hedge fund strategies will also be possible, given the removal of most investment restrictions. The UKLA suggests that the only requirement will be that the fund’s investment policy has the objective of spreading investment risk.
  • Listed feeder funds (ie. funds created with the specific policy of investing into another, typically unlisted, fund) will be possible, but only if the listed fund can control the investment policy of the underlying fund and ensure that the underlying fund will comply with the rules about investment policies.

Will the Proposals Make Much Difference?

The greatest effect is likely to come from the UKLA’s confirmation that offshore funds can use the directive minimum regime for a London listing. Many private equity and hedge funds already operate from the Channel Islands or other offshore locations for tax and regulatory reasons, and so it will be easy for them to access this regime if they choose.

The change is seen to have been driven by recent listings of funds on the Amsterdam stock exchange, which led to concern that the City was missing out on a new market because of "anachronistic" rules. It seems to have had an immediate impact: January has already seen Brevan Howard, one of London’s biggest hedge fund managers, announcing that it proposes to list a £1bn fund in London under the offshore rules. Others hedge funds are understood to be looking at it as well.

However it’s not clear whether this really marks the beginning of a new trend. Private equity funds such as Permira (through SVG Capital) have had access to money from the public markets for years, and some funds which considered listing last year backed away after looking at the trading performance of other funds, or rejected the idea on the basis that the closer scrutiny and information demanded by the public markets would distract them from their core business of making and realising investments. Only time will show whether this really is a new market.

For property funds, the removal of restrictions on investments will be very useful and make REIT status with a main London listing available to more companies. This will be welcomed but is unlikely to make a major difference to the sector, as in practice the restrictions could be sidestepped by listing on AIM and taking a secondary listing on the Channel Island Stock Exchange (to meet the requirement of being listed on a "recognised stock exchange").

The most significant point may prove to be that the UKLA has given a clear signal that it is serious about ensuring the international competitiveness of the London markets for fund listings. Despite protests from the Association of Investment Companies that allowing offshore funds to use the directive minimum regime could let funds bypass protections which were introduced after the split-capital investment trust crisis, the UKLA has reconfirmed that it intends to allow overseas funds to use the regime - and even suggested that it might be appropriate to consider extending the regime to UK-based funds as well.

The consultation now runs until 28 February, after which there will be a further feedback statement leading on to the changes that are expected to be implemented in the third quarter of 2007. But even that is unlikely to be the end of the process - many issues remain open and further changes in the next few years would not be a great surprise.

Please click here for full details on the consultation.

Please click here to repond to the consultation.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 22/02/2007.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.