Investment & Performance objectives
Active Management & Investment Obligations
All funds will be invested in primarily residential property in prime locations with the potential for sustained capital growth and income.
The opportunity for “mixed use” acquisitions (combined residential and commercial properties) with strong commercial operations and profits may also be considered by the Property Advisor and an ongoing review of asset acquisition will be a core principle of their “active management” philosophy to maximise the opportunities for fund investors.
A key point of the annual review will be an assessment of the scheme assets to ensure the performance benchmark is exceeded to provide the underlying 10% net return for investors.
As has been stated, the funds cannot act as a “trading company” but the Trustees and their property advisors and professional valuers will review the overall performance and determine further acquisition from the income/interest account, and/or disposal and reinvestment in the case of underperforming assets or stock, which, in the opinion of the property advisors, has achieved maximum potential.
The legislation also allows the Trustees to undertake commercial borrowing in order to accelerate asset acquisition and investment returns. This is a core principal of the “Moderately Adventurous Fund” and will be a feature of a number of future funds. The investment strategy and an analysis of the review process will form part of your annual statement together with a statement of fund values and returns achieved.
We believe this approach will provide members with the maximum potential for return on investment and enjoy the benefits of a new era of active management, not often available in the retirement funds marketplace and usually at an additional fee charge to the investor.
Performance Objectives
The overall investment objective is to maintain property assets that continue to generate increasing capital value and maximum income yields to provide an overall year on year net 10% return.
The overall yield in the initial years is likely to be considerably higher as the actual yield will be boosted by the initial “tax credit” that S.I.P.P. investments enjoy.
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Example of overall yield over ten years for a...
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BASIC RATE TAX PAYER
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HIGHER RATE TAX PAYER
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Investment Contribution |
£50,000 gross / £39,000 net |
£50,000 gross / £30,000 net |
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Assume 4% net net income yield per annum |
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Assume 6% compound capital growth |
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Fund value @ 10 years |
£109,542 / growth £59,542 |
£109,542 / growth £59,542 |
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Equivalent to annual yield of |
15.26% |
19.84% |
For initial investment funds of £20,000 gross contribution with the appropriate reductions via tax credits will achieve the equivalent yields of 15.26% for a basic rate tax payer and 19.84% for a higher rate tax payer
Active management of the fund assets and further investment of the revenue receipts (bank deposit interest and direct property income) will further enhance the future fund values.
Flexibility within Funds
Throughout the Information Memorandum we have referred to investors as members (shareholders) in groups of 20 / 50, forming a syndicate investing in each fund. There will be no cross liability to other members of other funds.
The majority of funds or cells as they will be known internally will be very similar in nature at outset, apart from the differences as outlined in Fund Options.
As the cells mature, individual members’ requirements may change (i.e. a change of retirement date, early retirement due to ill health). In this instance regular income may well be required and flexibility within and across cells will accommodate individual investor’s requirements.