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Product review: Hearthstone residential property fund

New residential property fund targets growth of House Price Index

By Laura Suter | Published Jun 01, 2012 | comments

With a £4trn market to tap into, Hearthstone’s new residential property fund has a lot of options to invest in.

The Property Authorised Investment Fund has been given FSA approval and will soft launch in the summer, followed by a full launch in September.

Hearthstone is targeting a fund size of £250m in the first two years with an ultimate goal of a hefty £1bn+.

The fund will aim for 85% in property, 10% in cash and 5% in liquid assets, such as shares in property firms. It will also have access to 10% in debt that it can use if liquidity issues arise.

Hearthstone is aiming to stick to Acadametrics data, which shows the spread of property across the UK, in order to get a good geographical spread.

The team will buy existing houses and work to develop new residential properties, which it says will help to boost UK housing stock in “a time of rapidly rising demand”.

It is targeting the growth of the Land Registry House Price Index, with expected income of 2.5-3%, which will be rolled up in the fund rather than paid out. It will be managed by David Gibbins and Lucy Hawkins, who joined in March of this year.

Minimum investment is £1,000. It is ISA and SIPPable and regular savings are allowed. Charges are 1.5% AMC and 4% initial, of which 3% is adviser commission that can be rebated.

hsinvestments.co.uk

MM View:

Property has had a bumpy old time of late. Morningstar data on the IMA Property sector, as seen in Money Management’s property special report, showed the average return in the sector was £766 on a £1,000 investment.

But that is the commercial property market, which is a different kettle of fish to residential. It has also seen its own ups and downs but is typically better understood by Joe Public.

Land Registry figures show the average UK house price is currently £160,372, compared to £182,600 at the peak in November 2007. However, this is still above the mid-recession low of £151,638.

Until now, investors have had few options for residential property investment beyond buying their own home. With first-time buyers struggling to get a toe on the ladder, this could offer a good route into the sector without having to sign away their life to a mortgage.

The fund is not available until early to mid-July, with a full launch in September. It will start with initial seeding from national house builders of between £30-50m.

laura.suter@ft.com

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