Understanding fund structure is critical to getting the right investment management insurance.

When something goes wrong, blame can be appointed left, right and centre and an insurance policy that doesn’t name all the correct legal entities could leave someone exposed.

It’s complicated, but we can help, and it could be relevant beyond the world of investment management.

In most cases, authorised investment funds are legally separate entities from the persons or company managing the investments.

This simple fact is crucial to understand.

The exact structure depends on the type of fund but in the majority of UK authorised fund structures, the fund itself is a separate legal entity.

The investment manager – and often the Authorised Corporate Director (ACD) – is a separate company appointed to run or oversee the fund. This separation is deliberate and central to investor protection.

How that works in practice

Taking Open‑Ended Investment Companies (OEICs) as an example, an OEIC is a separate legal entity in its own right. It’s incorporated under UK company law and has its own legal personality. Investors are shareholders and the OEIC appoints its own ACD and investment manager.

The investment management company does not own the fund and is not legally the same entity.

Looking at a unit trust, it is not a company, but it is still legally separate from its investment manager. The trust is constituted by a trust deed and assets are held by a trustee. Although the manager operates the trust, they don’t legally own the assets.

It offers investor protection. Legal separation ensures fund assets are ring‑fenced; creditors of the investment manager cannot claim against fund assets; and investor assets are protected if the manager becomes insolvent.

It provides regulatory accountability. The fund structure is regulated and the manager is authorised separately by the Financial Conduct Authority (FCA); and the ACD remains responsible for fund governance even where investment management is delegated. This allows the FCA to hold the correct entity accountable and enforce governance without putting client assets at unnecessary risk.

What does it mean for investment management insurance?

First and foremost, investment managers will want to protect the company, including themselves and the directors, against claims.

With three distinct entities – investment managers, the fund itself, and the ACD – it’s important to know who is responsible for what.

In most cases the ACD will represent dozens if not hundreds of different investment managers, while an investment manager is only concerned with the fund they manage. 

Who should be named on the policy?

When organising investment and fund management insurance it’s critical insurers are aware of all the parties involved, to ensure the correct entities are named.

Typically, a policy will be organised in the name of the investment management company, but we would also expect any policy to clearly identify the funds which are managed by that company.

The ACD might not necessarily be noted, as they will be representing the interests of various funds and investment managers, but they must ensure they have their own high-quality insurance provision.

What you can do to get the right cover

You can’t control which entity will be pursued when litigation happens and it’s not uncommon for mud to be thrown in all directions or litigation to be taken against multiple parties.

What you can do is get expert advice from an insurance broker that understands the intricacies of corporate structure ,because if your policy only names the investment management company or the fund, someone could be left exposed.

Speak to our team of friendly experts to get the right and relevant entities are covered.