{"id":139210,"date":"2026-04-22T09:05:43","date_gmt":"2026-04-22T09:05:43","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=139210"},"modified":"2026-04-22T09:05:43","modified_gmt":"2026-04-22T09:05:43","slug":"united-kingdom-real-estate-funds","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/united-kingdom-real-estate-funds\/","title":{"rendered":"United Kingdom: Real Estate Funds"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-139210","comparative_guide","type-comparative_guide","status-publish","hentry","guides-real-estate-funds","jurisdictions-united-kingdom"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Goodwin<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/04\/Goodwin-PNG.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Goodwin<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/04\/Goodwin-PNG.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Real Estate Funds laws and regulations applicable in United Kingdom<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the principal legal structures used for investment in real estate (e.g., limited partnerships and other fund vehicles, real estate investment companies, real estate investment trusts\/ unit trusts)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The most common UK non-listed real estate investment structures are:<\/p>\n<ul>\n<li>English limited partnerships<\/li>\n<li>Jersey limited partnerships<\/li>\n<li>Luxembourg special limited partnerships (SCSps)<\/li>\n<li>Jersey Property Unit Trusts<\/li>\n<li>UK private limited companies<\/li>\n<li>Asset Management Agreements<\/li>\n<\/ul>\n<p>In addition, regulated funds in the UK can be established as:<\/p>\n<ul>\n<li>Open-ended investment companies (OEICs)<\/li>\n<li>Authorised unit trusts (AUTs)<\/li>\n<li>Authorised Contractual Schemes (ACS), that can be in one of 2 forms:\n<ul>\n<li>A contractual co-ownership scheme (CoACS) \u2013 a type of contractual scheme, based on a co-ownership model<\/li>\n<li>An authorised limited partnership (ALP) \u2013 similar to ordinary limited partnerships, with some modifications<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>For regulated funds, for instance, an ACS can either be established as UK UCITS, a non-UCITS retail scheme (NURS), a qualified investor scheme (QIS) or a Long Term Asset Fund (LTAF), depending on the fund\u2019s intended strategy and investor base. The UCITS is not available for real estate investment. The expectation is that institutional investors will use the QIS (the least regulated form) and the retail market will invest via the form of a NURS or via a feeder. The LTAF can be marketed to defined contribution (DC) pension schemes and high net worth individuals (HNWIs) in addition to professional and certain sophisticated investors that are also eligible for the QIS. However, these FCA-authorised funds tend to be utilised by managers mainly for UK investors and where there is a specific tax benefit in doing so. All such regulated funds tend not to be familiar to non-UK investors and, as such, are not generally widely used for capital raising outside of the UK. In addition, all of these vehicles are subject to comprehensive regulation (the fund itself and its operation is subject to FCA regulation, principles of business and other obligations) including prescribed investment restrictions, risk spreading requirements, borrowing limitations, governance, redemption and valuation related requirements. As UK vehicles, none of them have access to the AIFMD passport for marketing to EU-based investors.<\/p>\n<p>There is also the unauthorised version of the CoACS \u2013 the Reserved Investor Fund, which is generally available for investment by professional and institutional investors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do all these structures provide limited liability to the investors? If so, how is this achieved?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In the case of funds structured as limited partnerships (including the Luxembourg SCSp), provided that limited partners do not involve themselves in the management and operation of the partnership (other than as might be permitted by applicable safe harbours or \u201cwhite lists\u201d) and comply with applicable partnership law, an investor\u2019s liability will be limited to the amount of capital contributed by them to the partnership as a limited partner. For UK limited partnerships established as private fund limited partnerships (PFLPs), there is no requirement for a limited partner to make a capital contribution to the PFLP (unless otherwise agreed between the partners) and a limited partner in a PFLP will not be liable beyond the amount of partnership property available to the general partner(s) to meet the debts or obligations of the firm.<\/p>\n<p>In the case of funds structured as corporates, investors will typically hold shares in the fund and, as such, by operation of law, their liability will be limited to the amount paid up or agreed to be paid up on their shares.<\/p>\n<p>Beyond the operation of law, fund managers and investors typically negotiate and agree to limits on investor liability through contractual terms in the constitutional documents of the fund or side letters. For example, an investor\u2019s liability under indemnity provisions might be limited to an amount not exceeding that investor\u2019s capital commitment to the fund.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does structure depend on sector (residential, industrial\/logistics, office, living, retail) or investment strategy (core, value-add, opportunistic)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Investors\u2019 regulatory, tax and reporting requirements are the biggest drivers of fund structuring, more so than sector or strategy. Authorised funds are more likely to be used for funds predominantly targeting retail wealth or DC pension capital; whereas unregulated limited partnerships are a typical vehicle of choice for institutional and professional investors. For UK managers raising capital on a global basis, generally a master-feeder structure is preferred to provide maximum flexibility. The master-feeder structure is often complemented by one or more parallel funds to meet specific legal, tax or regulatory requirements of certain investors.<\/p>\n<p>Certain non-U.S. investors and U.S. tax-exempt investors will generally prefer a corporate structure or a partnership structure which has elected to be treated as a corporation for U.S. tax purposes. This provides an opaque entry point, which manages exposure to certain U.S. tax and tax filing related risks. U.S. taxpayers typically prefer an entity that is treated as a partnership for U.S. Federal income tax purposes, which provides tax transparency.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the regulatory framework distinguish between different types of real estate funds (e.g., REITs vs. private real estate funds, development funds vs. income-generating property funds, open-ended vs closed-ended) and, if so, how?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>If an entity is an \u201calternative investment fund\u201d under the UK AIFM Regulation (that is, a \u201ccollective investment undertaking\u201d (<strong>CIU<\/strong>) that raises capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors (and that is not a UCITS fund)), it must be managed and marketed by an AIFM and will be subject to regulatory compliance relating to authorisation, marketing, capital requirements, valuation, depositary, portfolio companies, remuneration and reporting. The CIU definition is broad and it is irrelevant whether an entity is open or closed-ended or listed\/unlisted and it can capture arrangements that may not be regarded as funds per se.<\/p>\n<p>For a UK entity that falls outside the definition of being an AIF (for instance, a joint venture limited partnership) it may still be a collective investment scheme (CIS) under the Financial Services and Markets Act 2000 (FSMA), in which case it will need to comply with FSMA, including the requirement to appoint an FCA-authorised operator if managed in the UK.<\/p>\n<p>However, note that certain regulated funds in the UK can only be open-ended (e.g. NURS, LTAF, QIS).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How does the regulatory calculation of leverage apply to alternative investment funds that acquire real estate assets indirectly through non-listed companies? Are there any leverage limits that apply?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>AIFMD seeks to regulate borrowing at the level of the AIF rather than looking down into the assets (provided that any borrowing at asset level is appropriately ring-fenced and cannot endanger the wider asset pool of the AIF as a whole). The UK AIFM Regulation provides that temporary borrowing at the fund level does not need to be counted towards the leverage calculation, provided that the amount borrowed is covered by the amount of committed (but un-called) capital. In addition, asset-level leverage where there is no recourse to the fund should also be excluded from calculating leverage.<\/p>\n<p>Although the EU AIFMD2 introduces a new definition of \u2018leveraged AIF\u2019 and requirements on loan origination and \u2018loan-originating AIFs\u2019, UK AIFMs are not directly impacted by these changes.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there specific reporting requirements for property-level performance metrics (net operating income, cap rates, occupancy rates)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>While no specific reporting of property-level metrics is prescribed under UK regulations, investors typically require quarterly reporting that covers operational and asset-related metrics and KPIs as standard requirements.<\/p>\n<p>However, a UK AIFM must provide the FCA, for each of the EU AIFs it manages, and for each of the AIFs it markets in an EU member state, an annual report for each financial year no later than six months following the end of such financial year, as well as reporting on financial performance, principal exposures and concentrations, risk profile and leverage and asset valuation.<\/p>\n<p>In addition, UK managers with assets under management of over \u00a35bn have to prepare a sustainability entity report. This is to be based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations (around governance, strategy, risk management and metrics and targets). International Sustainability Standards Board and Sustainability Accounting Standards Board standards and Global Reporting Initiative may be relevant for the purpose of these disclosures, as may other reporting frameworks (e.g. the Taskforce on Nature-related Financial Disclosures).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are any disclosures required when properties are marked to market versus held at cost?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, market practice generally dictates that disclosures are provided, specific to the accounting standards adopted by the fund manager. Disclosures are typically included in the private placement memorandum or equivalent marketing documentation of the fund vehicle but the exact requirements depend on the accounting framework that is used by the fund (e.g. IFRS vs. US GAAP). Funds should clearly disclose whether underlying real estate assets are measured at fair value or historical cost and the accounting framework should be applied consistently across reporting periods. If marked to market is used by the fund, typically more extensive disclosures, including valuation methodology, fair value hierarchy, sensitivity analysis and changes in valuation, should be included. If held at cost, the carrying basis of the assets (i.e. being held at cost less depreciation\/ impairment) should be disclosed.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Who can perform the valuation function for real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The valuation function can be performed by either:<\/p>\n<p>(a) an external valuer which is independent from the AIF\/AIFM; or<\/p>\n<p>(b) the AIFM itself, provided the valuation task is functionally independent from the portfolio management and the remuneration policy, and other measures ensure that conflicts of interest are mitigated and that undue influence upon the employees is prevented.<\/p>\n<p>If an external valuer is appointed:<\/p>\n<p>(i) the AIFMD delegation provisions apply to that appointment (including there being a written agreement between the external valuer and the AIFM);<\/p>\n<p>(ii) professional guarantees are required; and<\/p>\n<p>(iii) the external valuer will be liable to the AIFM for any losses suffered by the AIFM as a result of the external valuer&#8217;s negligence or intentional failure to perform its tasks (note that the AIFM\u2019s liability towards the AIF and its investors is not affected by the appointment).<\/p>\n<p>For authorised funds there are additional requirements relating to valuations (for instance, for an LTAF, the authorised fund manager need not appoint an external valuer if the depositary has determined that the manager has the resources and procedures for carrying out asset valuation).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How often must valuations be performed and how does this differ between closed-ended and open-ended real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Valuations must be performed, and net asset value per unit calculated, at least once a year. For closed\u00adended AIFs, this also applies whenever there is an increase or decrease in capital.<\/p>\n<p>For open-ended AIFs, frequency of valuations will depend on what is appropriate to the AIF&#8217;s assets and its issuance and redemption frequency.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the liquidity management tools you would typically expect a manager to deploy for an open-ended real estate fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Subject to the rules and offering documents of the AIF and the applicable legal and regulatory regime:<\/p>\n<ul>\n<li>Setting redemption notice periods;<\/li>\n<li>Setting the frequency of dealing days;<\/li>\n<li>Imposing fund-level gates and\/or investor-level gates (however, only very limited gating would be permitted for certain NURS and for QIS);<\/li>\n<li>Creating side pockets\/ liquidating classes (not applicable for a QIS or a NURS);<\/li>\n<li>Applying hard or soft lock-ups (not applicable for a QIS or a NURS); and\/or<\/li>\n<li>(As a last resort) imposing a suspension.<\/li>\n<\/ul>\n<p>UK AIFMs are not directly impacted by recent amendments to EU AIFMD, including on prescribed requirements on liquidity management tools to be used, unless the UK applies equivalent changes through the FCA Handbook and UK AIFM Regulations.<\/p>\n<p>If a property fund is established as a NURS it is considered, since 30 September 2020, to be a \u201cfund investing in inherently illiquid assets\u201d (<strong>FIIAs<\/strong>) and is subject to additional regulatory requirements under new FCA rules. These new regulatory requirements require:<\/p>\n<ul>\n<li>Increased disclosure of how the fund manager is managing liquidity in the fund;<\/li>\n<li>Standardised risk warnings to be included in the financial promotions for the fund (but not required in the fund prospectus);<\/li>\n<li>Enhanced oversight of the fund and fund manager by the depositary; and<\/li>\n<li>Enhanced liquidity risk management contingency plans.<\/li>\n<\/ul>\n<p>Funds are considered to be FIIAs if they disclose to investors that they are seeking to invest greater than 50% in inherently illiquid assets or if the fund has held greater than 50% in inherently illiquid assets for three continuous months out of the last twelve months. FCA rules state that property is considered to be an \u201cinherently illiquid asset\u201d.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any limits on the manager\u2019s ability to restrict redemptions in open ended real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The AIFM is subject to terms of the FCA\u2019s handbook of rules and guidance, as they apply to the AIFM\u2019s liquidity management, in respect of both UK and non-UK AIFs. In particular:<\/p>\n<ul>\n<li>the AIFM must ensure that the investment strategy, liquidity profile and redemption policy of each AIF it manages are consistent; and<\/li>\n<li>the AIFM must, for each AIF it manages that is not an unleveraged closed-ended AIF:<\/li>\n<\/ul>\n<p>(a) \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 employ an appropriate liquidity management system; and<\/p>\n<p>(b) \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 regularly conduct stress tests, under normal and exceptional liquidity conditions, which enable it to assess the liquidity risk of the AIF and monitor that risk.<\/p>\n<p>Authorised funds have more prescriptive liquidity requirements. For instance, an LTAF cannot offer redemptions more frequently than once a month and is subject to a mandatory notice period of at least 90 days for redemptions. However, the frequency of the days on which redemption determinations are made and the particular notice period which is appropriate for an LTAF will depend on the reasonable expectations of the target investor group and the particular investment objectives, investment policy and investment strategy of the scheme.<\/p>\n<p>The authorised fund manager of a QIS or a NURS may impose restrictions on redemptions or temporarily suspend dealings in a QIS or a NURS, with the agreement of the depositary.\u00a0 For a QIS, the terms of such restriction or suspension must be specified in the prospectus, and any suspension may only be applied where the authorised fund manager has determined that there is sufficient reason, taking into account the interests of all unitholders.\u00a0 For a NURS, the suspension must be due to exceptional circumstances and be in the interests of all unitholders.\u00a0 Additional suspension rules apply to NURS that are property investment funds or money market funds.\u00a0 Any suspension must be immediately notified to the FCA.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are potential tools that a manager may use to manage illiquidity risks regarding the real estate assets of its fund (e.g., credit facilities, partial disposals, NAV financing)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In addition to the liquidity management tools outlined above such as redemption notice periods, redemption gates, side pockets and lockups, a number of tools are available to managers to assist with generating liquidity for investors, if required.<\/p>\n<p>Refinancings or partial disposals of the underlying assets can generate distributions to investors, and the growth of NAV financings at the fund or holding company level mean that many managers are assessing whether to borrow against some of the unrealized NAV of the fund, although currently this tends to be in order to enhance the portfolio rather than a \u201cborrow to distribute\u201d model.<\/p>\n<p>Preferred equity, involving bring in a new equity investor to take a preferred interest in the fund, can also provide much needed liquidity to existing investors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any other limitations on a manager\u2019s ability to manage its real estate funds (e.g., geographic diversification requirements, property type concentration limits, leverage restrictions)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>For a UK limited partnership that is not authorised by the FCA, the fund\u2019s investment and borrowing powers will be determined by its partnership agreement. For a non-UK AIF with an FCA-authorised AIFM, the FCA does not have direct oversight and the AIF would be subject to its rules and offering documents as well as applicable law and regulation in its jurisdiction.<\/p>\n<p>An LTAF&#8217;s authorised fund manager must ensure that the scheme property of the LTAF aims to provide a prudent spread of risk. A QIS simply has to have a spread of risk. Both an LTAF and a QIS may invest in certain specified investments under the Regulated Activities Order, as well as certain types of immovable assets and commodities. In addition, an LTAF is also permitted to invest in loans (with some restrictions) including investment in direct lending as part of a lending syndicate, unlike a QIS. The borrowing limit of an LTAF (30% of NAV) is more restrictive than the 100% limit for a QIS.<\/p>\n<p>NURS are subject to substantive restrictions on their investment and borrowing powers, similar to a UCITS, although a NURS is not restricted to borrowing on a temporary basis. Subject to limited exceptions, the assets of a NURS may only be invested in transferable securities, money market instruments, units in CIS, derivatives, deposits, property (immovables) and gold (up to 10% of the value of the scheme property). The NURS is subject to strict limits on the concentration of assets and counterparty exposure.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are managers or advisers to real estate funds required to be licensed, authorised or regulated by a regulatory body? And the real estate fund itself?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A UK undertaking which provides risk management and\/or portfolio management services to an AIF and is appointed by the governing body of the AIF as that AIF\u2019s designated AIFM must be authorised by the FCA to conduct the regulated activity of managing an AIF. For a structure that is not an AIF but that is a CIS, it will need to appoint an FCA-authorised operator and comply with UK FSMA.<\/p>\n<p>For authorised funds, the fund itself may also be subject to regulation in the UK, as well as the manager and certain service providers such as the depositary.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there different tiers to regulation applicable to local fund vehicles based on the size of the fund and\/ or the size of the manager?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>To benefit from the small AIFM regime in the UK, the AIFM must have no more than either: (a) \u20ac500 million of AUM where each of the AIFs it manages has no leverage and there are no redemption rights for the first five years; or (b) \u20ac100 million of AUM for all other AIFMs.<\/p>\n<p>In the UK, there are two different types of small AIFM: small authorised and small registered. A brief summary of each is set out below:<\/p>\n<p>(a) \u00a0\u00a0 Small authorised AIFMs &#8211; a firm which is authorised and regulated by the FCA in its own capacity. Whilst it does not need to comply with the full compliance requirements set out in AIFMD, it still needs to comply with the other obligations under the FCA&#8217;s authorisation regime; and<\/p>\n<p>(b) \u00a0\u00a0 Small registered AIFMs &#8211; there are three types permitted in the UK by the FCA. For real estate investments there is one that relates to a manager of an unregulated collective investment scheme that invests the majority of assets in land.<\/p>\n<p>The main advantages of being a small AIFM are that it is subject to fewer compliance and reporting requirements than a full-scope AIFM\u00a0 (including, for example, appointment of a depositary, minimum regulatory capital requirements and disclosure requirements). However, care must be taken on marketing in EEA member states under individual private placement regimes, as some jurisdictions do not permit marketing by small AIFMs. In addition, the restriction on AUM has to be met in order to maintain the small AIFM status.<\/p>\n<p>The AIFM regime in the UK is undergoing reform with proposals that will change the tiers and thresholds outlined above being subject to consultation, so it is likely the regime will change significantly in the near future.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How does the appointment of a property and asset manager typically work for a real estate fund? Are there any regulatory requirements to be aware of?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In most private investment fund structures (particularly limited partnerships), the AIFM is likely to be an authorised manager and a delegate of the general partner, or the general partner itself.<\/p>\n<p>The AIFM will be the party who carries out investment management functions, i.e. portfolio and risk management (whether directly or indirectly through a delegate) and who will need to be authorised. Discretionary management by the AIFM is a secondary management activity which would also need to be carried out by a regulated entity. Investment management does not include property asset management.<\/p>\n<p>An AIFM can also provide other non-core services (which may include asset-related activities such as asset management and property management in respect of one or more assets of the AIF) alongside its investment management function, although there is no requirement for it to do so. In a typical real estate fund, the AIFM would expect to outsource asset management and property management services to a third person (who may be an affiliate of the AIFM or a third-party) based on geography, sector, experience and requirements of individual assets.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What service providers are required by applicable law and regulation for real estate funds (e.g., property valuers, asset managers, property managers, custodians)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Real estate funds that are established as AIFs are to require to appoint an AIFM or authorised manager, a depositary, a valuer and an auditor. Other service providers, such as an administrator, investment advisor, property\u00a0 valuers, property managers, asset managers, development\/ construction managers, etc. are often appointed but are typically not mandated by applicable law. In the UK, an FCA-authorised AIFM or an operator may be required depending on the nature of the fund and those investors admitted thereto.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there local residence or other local qualification or substance requirements for the real estate investment fund and\/or the fund manager and\/or the property and asset manager to the fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Substance requirements should be considered in the jurisdiction(s) in which the fund vehicle and any subsidiary asset holding vehicles are established. It is important that any UK regulated fund manager that carries on a regulated function has the human and technical resources available to it to carry out its regulated functions. Further, fund managers should ensure that the fund itself and any vehicles in or through which the fund invests, are managed and operated so that the vehicle\u2019s place of VAT establishment, and for tax opaque funds, its place(s) of tax residence, or permanent establishment, are located solely in the jurisdictions intended.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rules apply to foreign managers or advisers wishing to manage, advise, or otherwise operate funds domiciled in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The activities of managing an AIF, managing investments, advising on investments and establishing, operating or winding-up a collective investment scheme are all regulated by the FCA when undertaken in the UK.<\/p>\n<p>An undertaking which is providing these services in the UK must either (1) be regulated by the FCA or (2) comply with a relevant exemption, e.g. for providing non-discretionary investment advice to a UK recipient, the exemption for overseas persons (which, amongst other things, requires the adviser not to provide the advice from a permanent place of business available to it in the UK).<\/p>\n<p>Conducting a business in the UK can also result in the establishment of a branch which will create filing obligations with Companies House and may impact on the UK tax position of the undertaking.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the typical level of management fee paid for real estate funds? Does it vary by sector or investment strategy (core, value-add, opportunistic)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Management fees, both in terms of percentage charged and also what that percentage is charged on, will differ significantly based on the strategy of the fund, the AIFM or the sponsor\u2019s track record and investor appetite for a particular fund product.<\/p>\n<p>Fee rates tend to be higher in respect of higher risk\/return strategies (e.g. value-add and opportunistic strategies) compared to lower risk\/return strategies (such as core-plus \/ core \/ debt strategies). On closed-ended funds, fees may be charged initially on aggregate investor commitments, stepping down to an invested capital basis once the investment period terminates. Fees on open-ended funds are typically charged on an invested capital \/ NAV basis. It is also common in real estate funds to offer tiered management fees based on the amount committed by an investor, the timing of their commitment and their overall exposure to the sponsor.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is a typical carried interest type in real estate funds? Is there a common approach to hurdle\/preferred return, catch-up provision, or other condition based on property-specific benchmarks? If so, please explain.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A distribution waterfall (preferred return, catch-up, carried interest) on a real estate fund depends very much on the fund\u2019s strategy and the target returns.<\/p>\n<p>It is common to see higher rates of preferred return and carried interest on higher risk \/ return strategies (e.g. value-add and opportunistic funds) and for the preferred return and carried interest rates to be lower on lower risk \/ return strategies (e.g. core-plus and core strategies), with some lower-return strategies having no carried interest (e.g. core or certain real estate senior debt strategies). Real estate funds also tend to have a relatively even split in terms of managers that operate the preferred return on the basis of an IRR calculation, and those that use a compounding interest rate formula. Catch up rates are rarely 100% on typical real estate funds, with a 50\/50 catch up being relatively standard for most strategies.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are typical management fees for real estate funds paid during and after the investment period, and how do these vary (if at all) in terms of the basis of the fee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>On closed-ended real estate funds, fees may typically be charged on investor commitments during the investment period, which may be stepped down to an invested capital (or NAV) basis after the investment period. Some sponsors may charge management fees on a blended basis (i.e. as a combination of fees on commitments and invested capital \/ NAV) or an \u2018invested capital only\u2019 basis during the investment period. Fee rates typically remain the same before and after the investment period.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any particular requests investors in real estate funds are likely to ask for in their side letters?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In addition to typical side letter requests (such as, information and reporting rights, confidentiality and disclosure obligations and documentation requirements), investors in real estate funds may seek enhanced asset-level reporting; valuation details and enhanced responsible investment\/ESG reporting. There is often more focus on the issue of local tax payment and tax filing risks in real estate as an asset class, particularly within Europe, given the prevalence of non-residence capital gains taxes and local transfer taxes that can apply.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can real estate funds be marketed to non-professional (retail) investors in your jurisdiction? If so, is this a particular form of real estate fund and what are the regulatory requirements?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Typically, UK unregulated private real estate funds cannot be offered to ordinary retail investors without prior investment advice and consideration of the suitability of that unregulated scheme for the retail investor. The AIFM (full scope) would need to obtain FCA approval and prepare a Key Information Document to be provided to retail investors prior to their investment. It would also be necessary to comply with the UK\u2019s financial promotion regime.<\/p>\n<p>However, certain UK regulated fund products can be made available to a broader set of investors, e.g., an LTAF is open to a wider pool of eligible investors including professional investors, certified sophisticated retail investors, certified high net worth investors, DC pension schemes and SIPPs. Since 3 July 2023 units in an LTAF are treated as Restricted Mass Market Investments for distribution purposes.<\/p>\n<p>Non-UK AIFs can be offered to UK retail investors only after they have received FCA permission under section 272 of FSMA. This requires the AIFM confirming that the AIF meets equivalent rules to a UK regulated fund in its home country.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there additional restrictions on marketing real estate funds to government entities or similar investors (e.g. sovereign wealth funds) or pension funds or insurance company investors, given their typical allocation targets for real estate?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no specific restrictions with regard to marketing to government entities or similar but there may be internal restrictions (whether in terms of real estate focused allocations or target investment criteria) which prevent such investors participating in real estate funds. There is also a regulatory overlay which may be applicable to certain investors, e.g. Solvency II requirements which place capital and solvency limitations on insurance companies; or fiduciary and prudence requirements placed on pension trustees. Certain UK local government pension funds are also classified as retail investors by default (which may require additional compliance in respect of marketing private real state funds to such investors).<\/p>\n<p>Sovereign wealth funds are often sensitive regarding confidentiality and disclosure of underlying owner information, which may inhibit investment into certain real estate funds which impose enhanced disclosure obligations. However, this is typically dealt with via side letter negotiations which reduce the disclosure burden on certain types of investors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What sustainability due diligence or disclosure requirements and ongoing compliance obligations apply to managers of real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The UK\u2019s SDR applies to full-scope and small authorised UK AIFMs for both authorised and unauthorised UK AIFs, including unlisted AIFs and feeder funds. It is a set of requirements covering:<\/p>\n<ul>\n<li>a new \u2018anti-greenwashing\u2019 rule;<\/li>\n<li>a voluntary labelling regime for products with a sustainability objective as part of their investment objective;<\/li>\n<li>product disclosure requirements;<\/li>\n<li>sustainability entity reporting; and<\/li>\n<li>retail investor-specific requirements on naming and marketing, consumer-facing product-level disclosures and for distributors<\/li>\n<\/ul>\n<p>A manager not using a label, but still in scope, will have to produce the same disclosures as for funds that have a label, alongside a prominent statement to clarify that its product does not use a label and why.<\/p>\n<p>Additional EU SFDR related regulatory disclosure requirements may apply if a UK AIF is marketed to EU investors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any mandatory energy efficiency reporting or carbon footprint disclosure requirements?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A UK real estate fund may be required to comply with a range of reporting requirements under the EU SFDR, UK SDR, TCFD and other regulatory standards, depending on the size and type of fund entity and where the fund is to be marketed.<\/p>\n<p>In addition, investors may also require disclosure under INREV and EPRA market standards, as well as additional reporting on energy efficiency, carbon footprint and other ESG indicators in respect of a real estate fund\u2019s investments.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">5269<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/139210","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=139210"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}