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Bluegate goes open-ended in bridging loans market

Bluegate Capital has launched an open-ended version of the closed-ended income fund it launched last November to invest in the bridging loans market.

The firm’s first secured income fund is now closed to new investment but the second was designed to meet demand for an open-ended version that is available to new investment at any time. The new fund will also have better liquidity than the closed-ended fund, allowing investors to redeem after one month’s notice provided they have been invested for at least five months. The notice period for the closed-ended version is much longer at 12 months.

The new fund is available  to investors as a limited partnership or as an exempt unit trust for investors in self-invested personal pensions and small self-administered schemes. It will provide 6 per cent gross income in year one, 7 per cent in year two and 8 per cent from year three, paid quarterly. These returns will be 1 per cent higher where fee-based advisers rebate renewal commission back to the client. A 1.5 per cent annual management charge will only be taken once the targeted income has been achieved.

The fund derives its income by lending money at an annual fixed rate to experienced bridging finance companies that then lend this money to people who need short-term finance. This means it will not be affected by interest rate changes and stockmnarket fluctuations. . Theinvestments of the fund are also protected by first legal charge securities over property assets, which will help preserve investors’ capital.

Blue Gate will lend money only to established bridging companies with proven business models and a track record of profits. The brisging  firms will be restricted to lend a maximum loan to valuation of 65 per cent. B;ue Gate says this means the property market would need to fall by 35 per cent before the fund would lose money.

Bridging companies tend to be relatively small and if their clients default, they may not be able to service or repay their loans obtained from the Blue Gate fund.However, the fund’s focus on quality bridging companies with loans of up to 65 per cent LTVsecured on borrower’s properties may reduce risks.



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