Type: Offshore Oeic
Aim: Growth and income by investing in commercial and residential properties mainly in England, France and other European regions
Minimum investment: $20,000 through a feeder fund, $100,000 for direct investments
Investment split: 100% in commercial and residential properties mainly in England, France and other European regions
Place of registration: Bermuda
Charges: Annual 1.5%, performance fee 20%
Commission: Initial up to 5%, renewal 0.5%
Tel:001 441 2966644
The Hemisphere property fund will initially invest mainly in the UK and parts of Europe such as France, but is likely to widen its investment remit at a later date to regions such as Canada and Costa Rica. It will invest in opportunities where properties, whether residential or commercial, can be bought at a discount then refurbished or renovated to make a profit.
Capital Trust Financial Management partner Bruce MacFarlane points out that the Hemisphere property fund offers advisers and their clients another play on the current unquenchable thirst for property-related investments.
He says: “The fund makes a play on the skills of the managers to acquire niche property at a discount to the market and the literature shows a few past examples of the manager’s skills prior to the formation of the fund.”
MacFarlane feels the literature is attractive and generally well presented with an impressive line-up of directors and officers. Adviser remuneration for placing is up to 5 per cent of the amount subscribed, but no renewal is payable out of the annual management fee or performance fee.
However, MacFarlane feels that although on the face of it the fund may look attractive and provide marketing opportunities for some advisors, he would stay clear of such an investment at this stage in the global economic cycle. “This is not because I have any particular grievance with the fund which may or may not be okay. I do, however, believe that the property market is too hot, driven by historically low interest rates and the sentiment shift from stocks in the aftermath of the equity bubble of the nineties,” he says.
MacFarlane notes that house prices have risen by more in real terms than during any previous boom, with house prices overvalued in many countries when comparing property values to rental incomes. `”In order to bring the ratio of prices to rents back to some sort of fair value, either rents must rise sharply or prices must fall,” says MacFarlane. Unfortunately, he fears the latter.
Considering the potential drawbacks of the fund MacFarlane says: “Investors should be aware of the lack of liquidity within the fund and the high charges. Adviser remuneration for placing is 5 per cent, coupled with the early redemption fee, annual management charges and performance charges will all take a toll on investment performance.”
He also thinks the fund is heavily loaded in favour of directors at the expense of shareholders, with the directors holding the right to compulsory redemption and power over the transfer of shares. “It is further intended to merge IFP property, a Bermuda-based company, with the fund whereby the fund will take over the liability for any of IFP’s obligations. These obligations, assets and valuations are not detailed and would require further explanation before recommendation.” says MacFarlane.
In MacFarlane’s view, this fund is only for the most sophisticated investors and those who want exposure to the property market would be better considering more mainstream funds. He says: “This fund will possible do quite well given time but why take the money risks involved and lack of liquidity when more suitable means of exposure to the market are available.”
Suitability to market: Poor
Investment strategy: Average
Adviser remuneration: Poor