Asset manager BlackRock has launched the UK’s first tax transparent fund (TTF) following on from the government’s decision to mimic the pooled fund structure seen elsewhere.
TTFs are collective funds that provide pension funds with a vehicle that avoids additional tax penalties by treating contributors as individual investors, directly owning securities.
These funds, officially known as authorised contractual funds (ACFs) in the UK, are currently available in Ireland, Luxembourg, the Netherlands and Germany, which has lead the UK tax authority to implement the funds to attract and retain capital on-shore.
Since the legislation passed last year, BlackRock has launched the first fund, which will offer a collective environment for investing in US equities.
The fund will track performance of the FTSE USA Index, which tracks US large to mid-cap listed stocks.
TTF usage is expected to grow, rivalling similar set-ups in other European countries, as well as the use of life funds in the UK.
Two London council pension funds recently announced their commitment to form a collective investment fund, using a TTF structure, which will offer reduced investment fees and maintain tax efficiency.
On the launch of the TTF, BlackRock head of UK retail said simple, tax-efficient solutions were important given the complexity for investors.
“The introduction of this new structure by HM Treasury last year is an important step in the next generation of tax-efficient solutions for UK investors,” he said.
“We also welcome the arrival of a level playing field, bringing the UK in line with other European fund centres.”