Type: Limited company (investing directly into the limited company)
Aim: To distribute an income of no less than 5.25% a year over medium term
Minimum investment: Lump sum £10,000 with multiples of £10,000
Investment split: 8% per annum to investors, above this, 60% to investors and 40% to facility operator Bigfoot and Stellar
Isa link: No
Charges: Initial 6% unless rebated, annual management charge 1.5%
Commission: Initial 4% and renewal 0.5%
Tel: 0203 326 0684
The Stellar income fund aims for an annual income of 6 per cent from a portfolio of self-storage space facilities in the Midlands and North-west. The company says the self-storage market in the UK is much less developed than that in the UK and Australia, offering scope for significant growth opportunities.
Looking at the fund’s market suitability, Capital Trust Financial Management director Bruce MacFarlane says : “In the current low interest rate environment, income is much sought after from all asset classes.
“The stellar income fund is an interesting fund which looks to provide a high and regular level of income from an unleveraged and unconventional property portfolio of self-contained storage facilities. It provides IFAs with a useful diversification tool for some of their more sophisticated clients, which will complement more traditional income assets such as equities and bonds.”
Looking in detail at the fund, MacFarlane notes that it carries a 6 per cent initial charge and 1.5 per cent annual management charge, out of which it pays a commission of 4 per cent initial and 0.5 per cent renewal to IFAs.
He points out that the fund aims to pay an initial income of 5.25 per cent, which is based on a current occupancy level of approximately 50 per cent. “It is anticipated that the income distribution will be increased as the occupancy levels rise, with a 10 per cent a year yield obtainable through occupancy levels of around 85 per cent.”
In MacFarlane’s view, the product offers another useful investment tool for the IFA when building an investment portfolio for their clients., but he points to some potential drawbacks. He feels that the investment is, by its nature, illiquid.
“Management should be able to grow occupancy and increase rents, but it does seem to have taken a long time to achieve 50 per cent occupancy. However, to be fair, this is not a market I have any great knowledge of and I would therefore give Stellar the benefit of the doubt, as it has undertaken the necessary research into this sector of the property market.”
Summing up, MacFarlane says: “This is a unique investment product so competition will be from other asset classes such as equities and bonds. I do not see the fund as a stand alone, but as a complementary investment to a well-diversified portfolio.”
He concludes that all the directors of Stellar previously worked at Close Brothers, which has a good reputation for innovative products in the property and tax markets.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average