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Julian Gibbs

Close Brothers is almost always in the lead for innovative products. It has just produced the property investment portfolio, which I believe is an excellent alternative to with-profits bonds.

It avoids office property and property in London. There are two portfolios, a growth portfolio and an income portfolio, both of which invest in a number of Close Brothers&#39 existing commercial property funds.

The growth portfolio will have a target annual growth rate of 7.5 per cent and the income portfolio will target an annual income of 5 per cent plus capital growth of at least 2.5 per cent a year.

The underlying trusts include the freehold income trust, which invests in the ownership and active management of ground rent portfolios, which are low risk and have shown a compound return of 9.8 per cent a year since 1993.

The active commercial estates fund invests in commercial properties of a size below those normally bought by institutional investors. The healthcare leisure property fund invests in specialist care homes, leisure-based properties and housebuilding.

The capital appreciation trust invests in secondhand retirement flats in sheltered accommodation, which it buys at a discount. The last fund is Close high-income properties, which invests in UK commercial property and concentrates principally on the industrial sector of the market, which is forecast to outperform offices and retail over the next few years. The target income of this trust is 7.75 per cent a year.

The mix of these funds will be decided by the manager. The income portfolio will invest mainly in the higher-income funds and the growth portfolio will invest mainly in the funds aiming for capital growth. These low-risk portfolios should show better returns than forecast.


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