L&G converts property fund to tax-efficient structure

Legal & General Investments has confirmed it is moving its flagship bricks and mortar portfolio to a property authorised investment fund (Paif) structure on May 27.

Investors in the £1.2bn L&G UK Property Trust voted overwhelmingly in favour of converting the fund into the more tax efficient structure at an Extraordinary General Meeting on May 9. After conversion, the portfolio will be called the Legal & General UK Property fund.

Legal & General’s move follows Ignis’s decision to switch its £1.2bn UK Property fund into a Paif structure, while in March Kames Capital launched its own Paif vehicle, the Kames Property Income fund.

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Unlike many real estate funds, Paifs do not pay corporation tax and distributions from rental income and interest can be paid out gross to qualifying investors, benefiting those investing through an Isa or within a pension.

Managed by Michael Barrie and Matt Jarvis, the portfolio aims to deliver an attractive income as well as capital growth and over the past 12 months to 10 May 2014, it has achieved a total return of 10 per cent versus an IMA Property sector average of 1 per cent. In three years the fund has returned 13 per cent against a peer group mean of 15 per cent.

Simon Pistell, managing director of Legal & General Investments, said: “At a time when the outlook for commercial property is brightening, greater tax efficiency will help ensure that UK real estate remains attractive for long-term investors.”