Close Asset Management has set up an ungeared closed-ended residential property fund that aims for a capital return of 8 per cent a year through investment in English residential property let to lifelong tenants.
The residential growth partnership builds on elements of the firm’s previous fund, the capital appreciation trust.
The five-year fund seeks capital growth through the acquisition of homes let on lifetime leases at a discount to their market value but it does not rely solely on house price appreciation to deliver returns.
At the end of the term, it will look to sell the entire residual portfolio to a specialist investor. Properties will be situated in the South-east and Home Counties.
Minimum investment is £20,000. Close is fund-raising until the end of February and is hoping to take in £15m. It is targeting offshore investors, original CAT investors and Sipp and Ssas money.
Managing director Nigel Ashfield says: “Talking to IFAs about the launch of the new product, there was a nervousness about any gearing, investing in a fund that can blindly invest in anything and commercial property but residential property was felt a safer play.”
Close anticipates a dip in the residential property market next year but expects to make the majority of its portfolio acquisitions over 18-24 months at the latter stages of the downturn.
Hargreaves Lansdown investment manager Ben Yearsley says: “You would have to do a lot of due diligence before investing in something like this. If you add in the fact that for most people the biggest investment is their house, I am even more sceptical.”