UK – The Financial Services Authority is proposing a new type of collective investment scheme for institutional investors and expert investors in the UK which should allow them to be more competitive within Europe.

At present the regulations for collective investment schemes has a ‘one size fits all approach’ which does not distinguish between investors of varying degrees of experience and expertise.

Explains Rob McIvor, spokesman for the watchdog: “Currently the schemes are available to everybody – [both retail and institutional_investors]. The problem being that institutional and heavyweight personal investors have had to go offshore into unauthorised funds if they wish to invest beyond plain vanilla – ie. incorporating property or hedging.”

The new type of collective investment scheme being proposed is described as “a halfway house between regulated funds and unauthorised and unregulated offshore funds.”

“There will be some degree of regulation, and still be some restrictions,” says McIvor. Investors will still be required to publish asset values and will not be allowed to let liabilities exceed assets, for example. The proposed funds however will allow investors to do things which UCITS disallow. “Investors will be able to leverage up, and have a higher percentage of assets in non-UCITS investments.”

The new proposal has been considered by the FSA for the last few years as it has gradually been pulling together its existing rulebooks for collective investment schemes. But adds McIvor, there has been appetite for innovation and flexibility from the market, to bring UK investors more in line with those on the continent.

“Commercially this is very good, as UK funds will be able to compete with their continental counterparts.”

The new category of non-retail scheme should come into effect early in 2004, with mandatory effect taking place from February 2007 in line with the new UCITS directive.