Reserved Investor Fund: The Treasury’s vote of confidence in UK real estate

In March 2025, a select group of fund managers and industry leaders discussed the new Reserved Investor Fund (RIF) and its potential for the UK real estate funds market.

With the ink barely dry on the passing of The Co-ownership Contractual Schemes (Tax) Regulations 2025 creating the new RIF, on 27 March 2025, we hosted a thought leadership dinner with a select group of fund managers and industry leaders to discuss the RIF. The guest of honour was Melville Rodrigues, the chief architect and lobbyist for the new fund structure.

The group reflected on a range of challenges in the sector and market that were key drivers behind the new legislation, starting with available structures, regulation, and tax. Uncompetitive market conditions, such as unpalatable set up and operating costs and unfavourable tax treatment, forced fund managers to choose between offshore vehicles like JPUTs or Lux funds, or painfully complex and expensive structuring. Some investors are driven towards offshore managers.

The discussion considered how, despite the introduction of the Long-Term Asset Fund (LTAF), the Mansion House initiative, regulatory reforms, and other schemes intended to simplify and homogenise the regulatory framework and encourage UK investment into UK assets, such schemes have not borne full fruit (as yet). We have neither seen the UK listed funds market regain its past levels of activity or global significance, and authorisation of an LTAF can take over a year. There’s a continued perception that UK pension funds primarily focus on assets which may be considered “safer” (like infrastructure) or other productive finance sectors, often in foreign markets, or may be otherwise overly focussed on liquidity.

On top of this, fund managers have faced an increasingly challenging fundraising environment. Political shifts and global events – such as Brexit, the pandemic, wars, currency fluctuations, inflation, and political uncertainty – have led to an exceptionally difficult period in almost every sector, particularly over the last 12 months. In addition, the real estate sector has faced significant hurdles, including turmoil across the retail and office markets due to the acceleration of online retail and hybrid working trends caused by Covid.

However, with challenges come opportunities. The invitees discussed investment strategies which might present the best growth opportunities, identifying key sectors such as low-carbon logistics, residential living, healthcare, and social infrastructure. Investments that address social needs, such as affordable housing and care homes, may experience short term difficulties if the US markets back away from ESG/D&I investments in response to political pressure. On the other hand, less overseas capital may increase opportunities for UK investors. 

The attendees considered that, as a new and untested product, early adopters will need to establish clear investment strategies to build confidence in the RIF as it develops. The hybrid nature of the RIF, which allows some limited liquidity for investors without the requirement of an authorised, open-ended fund, may be queried by more cautious investors. It was noted that, particularly in the real estate sector (as opposed to higher risk/reward markets), some will wait to see if there is general uptake of a new structure before being willing to commit to it, as was the case with QAHCs.

However, where the RIF can demonstrate (i) checks and balances built into the structure to ensure there is no mismatch between redemptions and liquidity, and (ii) robust oversight from the depositary (and within the AIFM framework), this should help alleviate concerns. This, combined with its significant potential to offer a more streamlined, flexible and cost-effective solution to the alternatives, could aid the RIF to quickly establish its credibility as an attractive alternative to expensive feeder vehicles, offshore structures and complex structuring.

It was noted that the bipartisan support of the RIF could be seen as a vote of confidence in the UK real estate funds market. The attendees further considered how the RIF could be used to support investment strategies that take advantage of current opportunities. For some types of real estate funds, RIFs can offer a more flexible and cost-effective option compared to existing onshore alternatives which could make them more attractive for some professional and institutional investors. With benefits such as income tax transparency, CGT efficiency, and simplified administration of capital allowances, RIFs will provide significant tax advantages. Designed to accommodate a wide range of asset classes, including real estate, its low costs, simplicity, tax efficiency, and regulatory advantages should set it apart from other structures

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