Type: Exempt unit trust
Aim: Growth by investing in land trading activities over a five-year period
Minimum investment: Lump sum £25,000
Investment split: 100% in land trading activities
Closing date: October 31, 2005
Charges: Initial 3% excluding IFA commission, annual 1%, 20% performance fee
Commission: Initial 4% plus up to 30% of the
Tel: 020 7877 4700
Cordea Savills, the fund management arm of the Savills property services group has established the serviced land fund which will target returns in excess of 15 per cent a year.
Informed Choice director Martin Bamford believes that investment in land can make up an important part of a clients investment in the property asset class.
He says: “This fund has the potential to deliver long term returns and the three core strategies look promising. Clients will be able to identify with the scope for increasing land values for onward sale to property developers. Investors in the scheme will be getting access to the expertise at Cofton as the primary asset manager.”
However, Bamford is not entirely happy with the fund. “It appears that the fund will initially have a lack of diversification, investing in a single asset. There appears to also be a conflict of interest with the suggested initial seed asset which is already owned by Cofton,” he says.
Bamford complains that the minimum investment for both private investors and pension trustees is high at £25,000. He adds: “Higher investment amounts are set at increments of additional £25,000 which makes the level of investment inflexible.”
Bamford also regards the charging structure and various performance fees as unnecessarily complex. “The offer of a share in the performance fee to introducing IFAs will be difficult to account for under the new menu regime,” he adds.
Scanning the market for possible competitors Bamford says: “As an unregulated collective investment scheme with a high minimum investment criteria the alternatives are likely to be direct private investment in land with the potential for development and other related land or property developments. If an investor is considering this scheme then they are likely to already have a diversified portfolio of land and property investment which will make a general property fund less appealing.”
Summing up Bamford says: “Cordea Savills appears to be sharing in all of the potential rewards from the investment but little of the downside risk. As a geared investment, intended to be approximately 55 per cent of the gross asset value, there is certainly investment risk to take into account.”
He concludes that advisers should be careful to point out the lack of investor protection available as compensation under the Financial Services Compensation Scheme does not apply.
Suitability to market: Average
Investment strategy: Good
Adviser Remuneration: Average