BlackRock expands tax transparent fund range

BlackRock is expanding its Tax Transparent Fund (TTF) range with seven new trackers, giving pension schemes looking to minimise withholding taxes a greater range of investment options.

Claire Finn, BlackRock
Claire Finn, BlackRock

The funds, which BlackRock says are suitable for Local Government Pension Scheme funds pooling assets, follow its launch of the UK’s first TTF, its ACS US Equity Tracker, three years ago.

In July 2013, HM Treasury introduced the TTF structure, a tax transparent fund for institutional investors. Since then, there has been a growing appetite for these vehicles among UK pension funds and insurance companies seeking to maximise their withholding tax treatment in a cost efficient pooled fund structure. Insurers subject to the Solvency II Directive are showing increased appetite as TTFs attract a lower capital charge. Through a TTF structure, the insurance company has unit holders rather than policyholders, meaning there is no capital cost on the insurance company’s balance sheet.

Investors in TTFs should be able to access the treaty benefits of their home jurisdiction, provided that both the jurisdiction of the investor and investment view the fund as tax transparent. Where viewed as tax transparent, this will allow investors to take full advantage of the relevant double tax agreement as if they had invested directly, while achieving the administrative benefits and scale efficiencies of pooling. This is different to a unit trust or fund company, where dividend income received by the fund is charged a rate of withholding tax based on the domicile of the fund vehicle.

The seven tracker funds, which are due to launch by June 2017, will offer UK investors access to global equity markets tracked by FTSE indices. The custody, fund administration and trustee services of the funds will be provided by Northern Trust.

BlackRock head of UK DC Claire Finn, Head of UK DC says: “Since their introduction, pension funds and insurers have found the TTF structure effective in helping to manage the tax efficiency of their investments, while having the security, governance and scale benefits of investing through a pooled vehicle.

“The launch of these additional seven funds allows our clients to express a view on global equity markets in tax efficient way, while also providing a solution to the requirements of Solvency II.”

BlackRock head of UK local authorities Christopher Head says: “Our Local Government Pension Scheme clients in England and Wales are currently pooling together their pension scheme assets. TTF structures are an important consideration for the pools and these funds will expand the range of available tracker investment funds.”

THE FUNDS

  1. ACS World ex UK Equity Tracker Fund
  2. ACS Japan Equity Tracker Fund
  3. ACS Continental European Equity Tracker Fund
  4. ACS UK Equity Tracker Fund
  5. ACS 50:50 Global Equity Tracker Fund
  6. ACS 60:40 Global Equity Tracker Fund
  7. ACS 30:70 Global Equity Tracker Fund