News

Flurry of residential funds

Hamptons International this week became the latest company to launch new funds investing in UK residential property.

It has joined forces with Consortium Investment Management to launch Nanofunds – a series of small residential property funds focusing solely on investment opportunities in London and the South East.

This is Hamptons’ first foray into the property fund market. Its director of global investment, Matthew Tack – who has advised other property funds – believes the new offerings differ from existing funds in the market.

They will look to raise maximum equity of £2m, with gearing of about 55 per cent, giving the fund a total of between £4m to £5m to invest – a tiny amount compared with the proposed £100m that the Candy brothers planned to raise for their residential property fund before it was put on hold.

“We believe by designing them this way, we are making them more flexible,” says Tack. “A lot of big funds might buy 100 flats in one building, which is great because it gives you buying power, but it doesn’t give you the flexibility to exit that building quickly when you need to.”

Hamptons’ first two funds will be a two-year development fund and a five-year growth fund.

The development fund will buy land with full planning permission for up to 20 units, which it will then build and sell in two years’ time. Tack says the “beauty” of this fund is that it is not dependent on capital growth in order to give investors a target return of 15 per cent a year.

“Investors will be making their return from the development profit,” he explains. “This means we can afford for the market to reverse a small amount before it starts to eat into the 15 per cent return.”

The growth fund will buy up to 10 properties in London districts such as Islington, Clapham and the City, taking advice from local Hamptons branches.

Hamptons is projecting a return of 10 per cent a year for the growth fund.

Both funds are closed-ended and charge an annual management fee of 1.5 per cent. Minimum investment is £20,000