The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

AIMA Responds to FSA Consultation on Retail Access to Funds of Hedge Funds

12 June 2008

London, 12 June 2008: The Alternative Investment Management Association (AIMA) – the leading global hedge fund industry association - has responded to the FSA’s latest proposals to allow retail investors simplified access to alternative investments through Funds of Alternative Investments Funds (FAIFs). AIMA has simultaneously submitted its response to HM Treasury’s related tax framework document for an appropriate FAIFs taxation regime.

In its formal response to the FSA’s further consultation on Funds of Alternative Investment Funds, AIMA has stated that it continues to support the FSA’s efforts to create the correct regulatory environment for FAIFs. The association has reasserted its view that FAIFs should be available to retail investors to grant them indirect access to hedge funds, which are leaders in their use of innovative investment techniques. AIMA has worked in close consultation with the FSA on development of these products since 2006.

AIMA believes that the FSA should reconsider some of the restrictions it is proposing for notice periods and leverage. AIMA sees these as unworkable in their current form in the context of funds of alternative funds. AIMA also foresees potential difficulties in the areas of illiquid instruments, repayment standards and liability of the manager in master/feeder fund structures. The combined effect of these restrictions will cause managers of FAIFs unnecessary difficulty and restrict FAIFs from being a popular form of investment.

In responding to the tax framework proposals by HM Treasury that would allow FAIFs to operate within its existing regulatory regime, AIMA accepts HM Treasury’s position that these proposals represent a “simple solution” to remove tax as a barrier to the commercial development of FAIFs, pending finalisation of the new offshore funds tax regime.

With regard to the tax framework, it is AIMA’s view that there are discrepancies within the current tax regime proposals relating to the treatment of investment returns as capital gains or income. It is vital that the tax regimes covering FAIFs and offshore funds are consistent and compatible, given the likelihood that the underlying funds within a FAIF will be based offshore. Until this is resolved, AIMA is concerned that the proposed regime does not present enough commercial incentive for existing offshore fund of hedge funds to move onshore.

Additionally, the FSA proposes conditions regarding genuine diversity of ownership. AIMA is seeking a grace period in order to prevent temporary difficulties in complying with the rules in certain situations.

Andrew Baker, Deputy CEO of AIMA, commented on AIMA’s submission, saying:

AIMA is encouraged by the FSA and HM Treasury’s latest recommendations to enable UK retail investment in FAIFs. On the whole, the proposed rules are appropriate and proportionate, and a strong signal from the UK government that hedge funds are to be regarded as mainstream investments.

In AIMA’s opinion, there remain important areas to be refined before the regime is likely to be workable and successful for both the industry and the intended retail investors. However, we are confident that considerable progress towards a successful outcome is being made, and we will continue to support the FSA in this process.”

– Ends –

For further information, please contact:

Eoin Brophy (Hume Brophy)
Managing Partner
T: +44 (0)20 7499 8736

Evan DeBarra (Hume Brophy)
Senior Account Manager
T: +44 (0)20 7499 8736

Editors’ Notes:

1. About AIMA

As the only truly representative global hedge fund association, AIMA, the Alternative Investment Management Association, has 1,280 corporate members worldwide, based in 49 countries.

Members include leading hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting services and fund administrators.  They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators, worldwide.

AIMA is a dynamic organisation that reflects its membership’s interests and provides them with a vibrant global network.

AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website

2. FSA and HM Treasury

The original consultation documents from the FSA and HM Treasury respectively may be found at the FSA website ( and the HM Treasury website (


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