Property investment fund gets FSA go-ahead

Hearthstone Investments, the buy-to-let fund quarter-owned by the estate agency chain Connells, is to launch this summer after receiving FSA approval.

The UK’s first regulated residential property fund, it will give investors with as little as £1,000 access to the residential property market without having to directly own any property themselves.

Although other residential property funds exist, they are not FSA regulated.

Hearthstone is structured as a PAIF (Property Authorised Investment Fund), a tax-efficient vehicle which allows funds to pay gross dividends from property rental income without having to deduct corporation tax.

Hearthstone will be open to individuals with ISAs and SIPPs as well as corporate investors such as pension schemes. It will soft launch this summer, with a full roll-out planned for September. It plans to raise £250m in the first 24 months.

The minimum investment is £1,000 and the fund will allow regular savings. The fund will acquire existing property, and also work with developers to support future acquisitions from new residential schemes.

Christopher Down, founder and chief executive of Hearthstone Investments, said: “At over £4 trillion, residential property is the largest asset class in the UK – bigger than UK equities and commercial property combined.

“Despite this, there have been no authorised funds in the sector, and most investors have been offered little choice other than direct ownership of bricks and mortar.

“Hearthstone’s fund platform will correct this anomaly, offering both retail and institutional investors the same investment options in residential as they have in other asset classes. FSA approval for our first fund is a significant step forward in enabling us to do this.”

The fund will be managed by David Gibbins, an experienced fund manager who has been a partner at Cluttons estate agents, and Lucy Hawkins, who has previously worked as fund manager for Grainger, the UK’s largest listed residential landlord.

Connells, a wholly owned subsidiary of Skipton Building Society, acquired a 25% stake in Hearthstone in February.

Connells will provide advisory services to Hearthstone, combining ‘grass roots’ rental market information with strong house-builder relationships and exposure to ‘off-market’ investment portfolios.

Hearthstone will also have access to other areas of expertise within the Connells Group such as bulk conveyancing and asset disposals. All the fund’s acquisitions will be made through Connells’ specialist Investor Sales division, and could include repossessions and part-exchanges.
 
Both Connells chairman Stephen Shipperley and David Livesey are on the board of Hearthstone as non-executive directors.

Mark Witherspoon is on the board as commercial development director. He is also strategic development director for Zoopla and ex-CEO of Hometrack.