The ClosePip fund of property funds was established in May 2003 but its offshore open-ended status meant it did not qualify for Isas and Pep transfers. By establishing the new fund to invest solely in ClosePip, this problem was solved and has opened the door to a wider pool of investors.
Investors can choose between a growth portfolio and an income portfolio. Both options have a target return of 7.5 per cent a year and invest in the same Close Property Investment funds the freehold income trust, capital appreciation trust, active commercial estates, Close high income properties, healthcare and leisure property fund, business centre properties and closed ended funds. However, the difference lies in the weightings each portfolio will allocate to each fund as a reflection of one portfolio focusing on income and the other on growth.
Freehold income trust is a residential ground rent fund established in 1992 and taken over by Close Brothers in 2003. The health and leisure property fund develops and operates budget hotels, care homes and leisure facilities. The capital appreciation trust buys empty flats to refurbish then let to pensioners under a lifetime tenancy agreement. Active commercial estates acquires and actively manages a range of commercial properties, Close high income properties invests in industrial properties and business centre properties specialises in the serviced office sector.
Unlike many Isa eligible property funds, the underlying funds invest directly in properties rather than shares in property companies. The advantage this has for investors is less correlation with equities which means greater diversification, whereas property shares tend to behave like the rest of the equity market.
However, as it invests in a range of sectors, there will be times in the property cycle when some sub-sectors will be carrying the less impressive performers. Close Property Investment is well aware of this but feels the benefits of diversification outweigh this potential downside.