The Kames Property Income fund, which is co-managed by David Wise and Alex Walker, has targeted an estimated yield of 6 per cent a year through its “tried and tested” ‘active value’ strategy, which the asset manager employed on its two existing institutional funds.
Kames’ strategy seeks to exploit the gap between prime and secondary property and will be applied to decently valued properties outside of London that offer the ability to enhance yield through initiatives, such as refurbishments, lease extensions and new lettings.
Properties will be sought within the £2m to £10m price bracket, which the asset manager described as often “too big for most private buyers and too small for many institutional investors”.
Aside from active value investment-style properties, the property authorised investment fund will also maintain a core property allocation for liquidity purposes.
Direct property will consist of up to 80 per cent of the fund’s holdings, with Kames also confirming that it could invest in indirect property and equities, including property companies, real estate investment trusts and specialist property funds, together with cash.
Steve Kenny, head of retail sales at Kames Capital, said: “The launch marks a very exciting time in the development of our business as retail investors are able to access our property expertise for the first time.”
Kames confirmed that the fund charged no initial fees and an annual management fee of 0.65 per cent.
Provider view:
David Wise, director of property investment at Kames Capital, said: “We believe the UK property market has finally turned the corner, with property valuations benefiting from the recovery in the UK economy. However, UK banks and other distressed property owners remain sellers, meaning many buildings are still available at attractive prices.”
Tom Dean, chartered financial planner at London-based adviser Plutus Wealth Management, said: “The fund is interesting as it is seeking to target this middle ground in UK property, which has been difficult to get exposure too for retail investors. Kames has put in place sensible measures to deal with the usual liquidity concerns, and certainly based on Kames’ estimates, the yield premium available within this sub-sector is very attractive. Within a client’s portfolio you are also looking for diversification, which means including assets that you hope will behave differently to equities and bonds. Traditionally that always included property due in large part to its rental yield. It came as a bit of a shock how little protection was offered by some property funds during the last five to seven years, so if by targeting these smaller properties with higher yields you reduce your portfolio’s asset correlations, it would be a welcome addition.”
Charges: Annual management charge of 0.65 per cent.
Verdict: The UK property market has filled debate columns over the past year, with many commentators indicating that it has stabilised and that the rest of the UK will potentially catch up with inflated prices in the capital. Schemes like Help to Buy have helped to fuel this debate, and particularly the government’s pledge to build new homes to match demand, but only time will tell if this drastically pushes up prices. Nonetheless, it is good to see a new entrant to this developing market, and one that is a more tax-efficient property authorised investment fund.
