The consultation paper  (Consultation Paper 185, "The CIS sourcebook - A new approach") which was issued ion 21 May, concerns proposed wider investment opportunities for retail products and a "lighter touch" of regulation for new authorised non-retail funds, restricted to institutional and expert investors only.

AIMA stated: "While acknowledging that the proposed new authorised fund indicates the FSA's more flexible approach to hedge funds and that such a product might be attractive to institutional investors, we have called for clarification and accommodation for funds of hedge funds and expressed concern that the new product could potentially be regarded as less "risky" than funds of funds which are currently widely available as unregulated offshore products".

The AIMA Working Group also met with the FSA to discuss
specific concerns in relation to funds of funds.

There remains the fundamental issue as to tax; without changes in the treatment of tax arising from an onshore fund's "trading" activities and from investment in offshore funds, the proposed new authorised fund and the changes for retail products will not be commercially viable for investors or managers.

copyright hedgeweek 2003