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Close moves in on property



Type: Offshore fund of funds

Aim: Growth or income by investing in property funds

Minimum investment: Lump sum £11,000, $15,000, euros 16,000

Place of registration: Isle of Man

Investment split: Choice of freehold income trust, capital appreciation trust, active commercial estates plc, healthcare and leisure property fund, Close high income properties plc

Yield: Growth portfolio 7.5% gross a year, income portfolio 5% gross a year

Charges: Initial 5%

Commission: Initial 3.5% until June 30, 2003, 2.5% thereafter

Tel: 020 7426 4018

The panel: David Mullin, Proprietor, Assured Investment Services,

Brian Pack, Principal, Brian Pack Financial Services,

Ali Robertson, Property director, TBO Corporate Benefit Consultants,

John Wright, Proprietor, Investment Management Services

Suitability to market 8.5

Investment strategy 8.0

Past performance 6.5

Company&#39s reputation 8.8

Charges 6.6

Commission 7.0

Product literature 9.0

Close Property Investment has established the property investment portfolio, an offshore fund of funds that invests in a portfolio of Close property funds. Investors can choose from a growth portfolio with a target yield of 7.5 per cent a year, or an income portfolio with a target yield of 5 per cent a year.

Looking at how the fund fits into the market Pack says: “It fits very well because investors are looking for alternatives to the equity market.” Wright thinks it has very good potential. He believes it has low risk volatility and feels the 7.5 per cent return from the growth portfolio looks attractive at the moment. Mullin says: “It offers a real alternative to equity investments in order to provide a balance for existing portfolios. It is for anyone wanting to invest in something other than bonds, fixed-interest or gilts and will offer a spread of investments without the use of an equity-based fund.”

Highlighting the type of client the fund could suit Robertson says: “The experienced investor who is looking for a higher-risk property fund.” Mullin says: “Any client with an existing portfolio who wants to spread their investment into a range of property-based portfolios.” Pack suggests it is ideal for those who are looking for a medium to long-term investment. Wright says: “Any client with more than a year&#39s salary in a deposit account and who has been using their Isa allowance, but who has further money to invest. The offshore tax advantage of this and the lower risk of this type of fund looks attractive.”

Assessing the fund&#39s marketing potential Pack says: “It will suit a limited mailshot for most advisers.” Robertson says: “It would suit portfolio managers who are looking to be overweight in property and who require higher than average yields. Or those who are looking for a stronger cyclical bias.” Mullin believes it represents an opportunity to offer an alternative to clients who have, in general, seen the value of their portfolios reduce. Wright says: “Advisers can go back to clients who have been reluctant to invest recently.”

Identifying the main useful features and strong points of the fund Wright says: “It is lower risk and offers reasonable potential. I like the idea of buying residential property with lifetime tenants through the capital appreciation trust.” Mullin says: “It has a good cross-section of property-based investments which are managed by a recognised company in the property field, with the options for growth or income to match a client&#39s needs.” Pack says: “It offers a choice of income or growth portfolios with multi-sectors for maximum protection.” Robertson says: “The focused management and the high yield are good features.”

Appraising the investment strategy Mullin says: “It&#39s an all round winning combination, which should provide a balanced investment with low volatility.” Pack thinks the diversification out of equities is a sound strategy. Robertson says: “We like the diversification and we think there are some strong upside possibilities in some of the sectors.” Wright says: “I think it&#39s good. It offers a balanced approach to property investment &#45 a hold for any portfolio.”

Highlighting the drawbacks of the fund Robertson says: “High yield usually suggests shorter leases. which in turn could suggest greater volatility.” Pack says: “It provides no access to funds in the first year. Investors should only be in for the long term.” Wright says: “The £11,000 minimum investment is a bit high and the product cannot be bought within an Isa at present.” Mullin says: “Its aim is to provide a reasonably conservative return, which could be seen as unadventurous. But it is not aiming to break any records.”

Assessing the company&#39s reputation Mullin thinks it is very good. Pack says: “It is very highly thought of in the industry but it is not well known to the public.” Robertson regards the Close Brothers group as a strong house that usually gets things right. In Wright&#39s view, the company&#39s reputation is first class.

Switching to an assessment of the company&#39s past performance,Wright says it is better than most while Mullin feels it is generally above average. Pack says: “Only one of its funds is 10 year old &#45 the rest are untested over time.” Robertson thinks its past performance is good.

Identifying likely competitors for the fund Wright says: “Ground rent and student accommodation funds are both in this field.” Robertson thinks the Allied Dunbar property fund will provide the main competition. Mullin points out that no other companies offer the same mix of funds.

Evaluating the charges, Pack thinks they are average for the market place while Robertson thinks they are reasonable. Mullin thinks they are fair. Wright sees them as par for the course but he points out that investors will have to pay charges on the underlying funds.

The panel unanimously agree that the commission is reasonable.

Casting an eye over the product literature, Pack thinks it is very clean, precise and comprehensive. Robertson says: “It is among the best in its class.” Wright thinks it is very good. Mullin agrees with Wright then adds: “It&#39s easy to understand &#45 as is what&#39s being offered.”

Summing up Wright says: “It&#39s first class, I will sell this fund to my clients.” Pack says: “Attractive alternative investment areas like this are gaining in popularity.” Robertson concludes: “Although it might be taken as read, there is no great emphasis on location. High yields are a bit like free lunches &#45 beware. This fund is not for the faint-hearted and we would keep a close watch in early performance.”


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