Liontrust has gained distributor status in the UK for the Liontrust European Long/Short Fund.
Liontrust has gained distributor status in the UK for the Liontrust European Long/Short Fund.
The fund is managed by Gary West and James Inglis-Jones (photo) and has around USD87m in assets.
Liontrust says distributor status is advantageous for UK investors because it means gains from the Guernsey-domiciled and Dublin-listed Liontrust European Long/Short Fund are subject to investors’ capital gains tax rather than income tax.
In contrast, gains from hedge funds and offshore funds without distributor status are subject to income tax for UK investors.
The 18 per cent rate of capital gains tax is attractive compared to the 40 per cent income tax rate for top rate taxpayers, and distributor status also enables investors to take advantage of capital gains tax allowances.
From launch on 6 December 2006 up to the end of 2008, the euro share class of the fund, which is only open to professional investors and has a minimum investment of EUR100,000, returned 44.58 per cent. In 2008, the euro share class of the fund returned 11.32 per cent.
The fund is non-directional and has had a low correlation in its returns to both European stock markets and other European long/short funds.
The European Long/Short Fund is based on the same investment philosophy as the UK-domiciled long only Liontrust Continental Europe Fund, known as the Cashflow Solution.
The objective of the Cashflow Solution is to exploit opportunities created by the failure of company managers to forecast profits accurately. The Liontrust European Long/Short Fund buys companies with good cash flows that are likely to beat investors’ low profit expectations and sells short expensive companies with unexpectedly poor earnings potential.
To help the managers achieve this, two cash flow measures are used: cash flow relative to operating assets and cash flow relative to enterprise value.
‘The Liontrust European Long/Short Fund has been well received by discretionary and fund of funds investors,’ says Rob Page, marketing director at Liontrust.
‘Gaining distributor status will make the fund even more attractive to professional investors in the UK. We believe the fund is particularly attractive given that it delivered a return of 11.32 per cent in 2008 at a time when most hedge funds and long only funds suffered significant losses.’
HM Revenue & Customs has announced it plans to reform the offshore funds regime, with a new reporting regime expected to replace the distributor status regime.
Liontrust says it plans to comply with any new reporting regime to ensure there is no change in the tax status of gains from the Liontrust European Long/Short Fund for investors.
