The legislation ensures that the assets of each sub-fund in an open-ended investment company umbrella fund are ring-fenced from the other sub-funds. As a result, a sub-fund cannot rely on the assets of another in order to cover liabilities, the IMA said. 

The measure comes at a time when the IMA and other UK industry bodies have been lobbying for tax and regulatory changes to the funds regime to ward off competition from rival centres such as Ireland and Luxembourg in recent years.

“The risk of a sub-fund ending up with more liabilities than assets is miniscule, but the new PCR removes the potential for cross-liability between sub-funds. The PCR is therefore a further welcome step to improve investor confidence and to enhance the competitiveness of the UK as a key fund domicile,” said Julie Patterson, director of authorised funds at the IMA.

“This, together with the launch next year of tax-transparent funds, cements the UK’s position as a fund domicile of choice,” Patterson said.