The supply of ground rents was fairly limited until recently, so Close Brothers did not market the fund actively.However, an exceptionally large number of flats are now being built and the supply of ground rents has been boosted significantly. Most of these are on 125-year leases. Ground rents may rise when there are rent reviews, lessees require lease extensions or a change of use to existing leases. This fund may also offer to sell a freehold interest to the lessee, which will typically generate a much higher sum than was paid initially to acquire the asset. Actual returns from the fund are likely to be lower over the long term than investing purely in commercial property but are much less volatile. The fund has generated a total return of around 23 per cent since 2003 compared with 14 per cent for the average bond fund and the average return on gilts of around 15 per cent, as measured by the FTSE All Stocks Gilts index. Gilts are also likely to prove more volatile than the Freehold income trust unless held to maturity. The fund has a 13-year track record and has averaged annual returns of 8.6 per cent per cent. However, current low interest rates mean that the total annual return is likely to be around 6 to 8 per cent including income of 4.25 per cent. In today’s uncertain markets, I believe that this fund is a better bet for the conservative investor than investing in gilts or corporate bonds.