Charity Authorised Investment Fund: FAQs

The CAIF regime affords the same benefits of a CIF, but it also provides two further benefits:

• The CAIF is dual-regulated by the Charity Commission and Financial Conduct Authority (FCA), unlike the CIF which is regulated by the Charity Commission only.
• The CAIF structure removes the charging of VAT on management fees, which is currently applied in a CIF. This is a financial benefit to all unitholders, which will be represented by a reduced Ongoing Charges Figure (OCF).

It is the opinion of BlackRock Fund Managers Limited that the CAIF regime retains all of the benefits of the CIF regime but with added benefits which include: (i) being subject to regulatory oversight by the FCA; (ii) being subject to charity law oversight by the Commission; and (iii) an exemption from value added tax (“VAT”) on fund management fees.

BlackRock continually reviews its fund ranges to ensure that the investment characteristics and positioning of its funds remain both relevant to and consistent with the current investment environment and expectations of its clients.

Consequently, BlackRock has completed a review of its charities CIF range and believes that the new CAIF structure provides its charities clients with additional benefits not provided under the CIF.

The main change is that the legal structure of the existing CIF has become Charity CAIF. The change is intended to take advantage of the additional benefits offered by the CAIF regime and not to materially change the objectives, risk profile, or the way in which the funds are managed.  

The names of the funds have changed on conversion to bring them in line with BlackRock’s and the FCA’s naming convention. Equally, a number of the current fund names refer to a CIF, and will no longer be applicable on conversion. The new names are intended to be “true to label” and more explicitly reference the asset class and investment approach of the fund.

The Annual Management Charge (AMC) remains unchanged, with the exception of BlackRock Charities UK Equity Index Fund (formerly known as Charitrak). The AMC has reduced from 0.085% to 0.075%. BlackRock regularly reviews the fees it charges to ensure that they remain competitive and represent value for money.

 

CIF fund name	New CAIF fund name
Armed Forces Common Investment Fund	BlackRock Armed Forces Charities Growth & Income Fund
Charifaith Common Investment Fund	BlackRock Catholic Charities Growth & Income Fund
Charishare Common Investment Fund	BlackRock Charities UK Equity Fund
Charishare Restricted Common Investment Fund	BlackRock Charities UK Equity ESG Fund
Charinco Common Investment Fund	BlackRock Charities UK Bond Fund
Charitrak Common Investment Fund	BlackRock Charities UK Equity Index Fund

The investment strategies of the existing fund and the new fund are similar. However, the wording of the respective investment objectives and policies are drafted in different styles, with that of the new fund being more expansive to comply with the requirements of the FCA to clearly set out the investment objective and policy of the fund. The investment objective and policy of the new fund has been drafted in accordance with the requirements of FCA Policy Statement 19/4 which sets out the FCA’s current expectations regarding drafting of the investment objective and policy sections and the benchmark disclosure requirements.

This approach is to ensure that the language used for the new fund is consistent with the level of disclosure employed in most of the Manager’s wider fund ranges. In practice, whilst some minor realignment of the portfolio may be required to comply with the FCA Rules, this will not materially change the way the assets of the existing fund are invested once transferred to the new Fund.

No - there is no impact on the risk rating of the fund given that its’ strategy remains the same with the key material change being the funds’ legal structure changing to a CAIF.

XD	Pay Date
1 January 1 April 1 July 1 October	20 January 20 April 20 July 20 October

In a CIF structure VAT is chargeable on the annual management fee. This charge makes up a component of the Ongoing Charges Figure (OCF), which also includes the management fee and other administration and custody costs. The OCF is intended to represent the total cost of ownership experienced by investors in the Fund.

Under the CAIF regime, VAT is not charged on the management fee and is therefore not a component of the OCF. Whilst the OCF is variable and can go up and down, it is expected that the transition to a CAIF, the OCF will be reduced due to the exemption from VAT.

Currently in a CIF structure VAT is chargeable on the annual management fee. This charge makes up a component of the Ongoing Charges Figure (OCF), which also includes the management fee and other administration and custody costs. The OCF is intended to represent the total cost of ownership experienced by investors in the Fund. 

Under the CAIF regime, VAT is not charged on the management fee and is therefore not a component of the OCF. Whilst the OCF is variable and can go up and down, it is expected that following transition to a CAIF, the OCF will be reduced due to the exemption from VAT.

The difference between these can be found in the FCA handbook (COLL 4.2.5 R (3) (c-b)). Please click here to view the FCA handbook.

To summarise: 

A target benchmark is a benchmark reflecting the target performance of the fund. In the case of BlackRock Charities UK Equity Index Fund (formerly known as Charitrak), the funds’ explicit performance objective is to track the performance of the FTSE All Share, and so that is the target benchmark.

A constraining benchmark is used when it is acknowledged that the composition of a fund is constrained by reference to the value, the price or the components of an index

A comparator benchmark is used when the performance of a fund is compared to, without targeting to meet, the value or price of an index. For our active strategies, the performance is compared to the selected index/Composite, and so these are comparator benchmarks. 

Therefore, in the case of all of our Charity Funds:

• BlackRock Charities UK Equity Index Fund has a target benchmark
• BlackRock Charities UK Equity Fund, BlackRock Charities UK Equity ESG Fund, BlackRock Charities UK Bond Fund, BlackRock Catholic Charities Growth & Income Fund and BlackRock Armed Forces Charities Growth & Income Fund have Comparator benchmarks