Groups blast PAIF-unfriendly platforms

Asset managers have accused platforms of harming investor interests because they are unable to support tax efficient property funds, which were given a welcome boost in last week's Finance Bill.

Property Authorised Investment Funds (PAIFs) are open-ended investment companies holding direct property, REITs, or a combination of both. Tax exempt investors investing through ISAs and SIPPs, benefit from receiving tax free income from up to three different sources.

Aviva, LGIM, SLI, and Threadneedle are among the groups ready to convert existing property funds to PAIFs next year. But they say fund platforms so far cannot distribute this type of product because they are unable to manage PAIFs' separate income streams.

The platforms have been working with bodies such as the Association of Real Estate Funds (AREF) since PAIFs were first mooted in 2008.

However, they say they have yet to see enough investor demand to change their systems to accommodate them.

Russell Lancaster, head of commercial and key accounts at Cofunds, said PAIFs are not a top priority for the platform at this stage.

"We have completed the development work that needs to be done in order to accommodate PAIFs, but there is no real demand for them from the market.

"Where there is demand we will respond, but from our discussions with fund groups, it is not clear who is doing what [in terms of converting to PAIFs].

"It is not as simple as just putting the funds on the platform as we have to work out how we can accommodate the three income streams.

"We have done the initial analysis on the costs involved and it would not be significant, but the work, resource, time and effort would have to be diverted from something else. We would have to take a call on what is a priority, but at the moment PAIFs are not at the top of our list."

Skandia said its platform is more concerned with the run-up to the retail distribution review than PAIFs, and has yet to support them.

"At the moment, Skandia does not offer PAIFs via its platform and we have not seen sufficient demand to make them available.

"However, we will continue to monitor this following the recent taxation changes. Our immediate focus at the moment is on building a RDR-ready platform," the group said.

Standard Life Investments is planning to convert its £248m UK Property fund to a PAIF in the first half of 2012, but investment director Barry MacLennan said inaction by the platforms is the "sticking point" hindering its progress.