Hearthstone is pleased to announce that the FSA has approved the UK's first authorized residential property fund, the TM Hearthstone UK Residential Property Fund.
Created by Hearthstone in partnership with Tutman, a specialist authorized fund operator, the fund is an open-ended 'tracker-style' product which will provide exposure to a diversified portfolio of private rented sector properties broadly representing the UK house price index.
Aimed initially at retail investors, it will attract those who are seeking an alternative to the concentration risk and management problems of direct investments, especially given the current lending environment for buy-to-let mortgages. As an FSA authorized PAIF (Property Authorized Investment Fund), investments can be made through ISAs and SIPPs, either directly or via fund platforms, with a minimum investment of just £1,000.
The fund will also be available to institutional investors, offering opportunities for portfolio diversification and an alternative to commercial property investment.
The fund's strategy will ensure that investments match the existing geographical distribution of housing stock in the UK, from flats to detached houses, with data based on the LSL Acadametrics House Price Index. Hearthstone is currently working with major UK house builders to seed the fund with an initial portfolio of around £30-50 million.
As well as acquiring existing stock from house builders, Hearthstone will work with developers to support future acquisitions from new residential developments, contributing positively to UK housing supply in a time of rapidly rising demand.
Hearthstone's target for the fund is £250 million in the first 18-24 months, rising to potentially more than £1 billion by year five as support for the new residential funds industry becomes more widespread.
Christopher Down, founder and Chief Executive of Hearthstone Investments plc, said: "The approval of our fund is a milestone for our industry. The UK's private investors can for the first time gain exposure to the UK's largest asset class, residential property, something they instinctively understand and value as a long-term investment.
"Institutional portfolio managers can diversify their existing property portfolios yet avoid the need to make illiquid, highly concentrated direct investments which require intensive management. With the UK's first residential PAIF, Hearthstone has created a new source of residential investment and we are excited by the potential of this fund and those which will follow."
Earlier this year, Hearthstone completed a strategic investment deal with the Connells Group, a subsidiary of Skipton Building Society, who acquired a 25% equity stake in the business. In addition to its role as a shareholder, Connells will provide 'grass roots' rental market information to Hearthstone's fund managers and support the fund's operational activities in a number of ways.
Source: FTI Consulting