Boutique fund manager, Horizon Asset Management, has launched the Income Bond Series One (the ‘Bond’), which offers 5 per cent per annum and 100 per cent return of capital after five years. The Bond is available to institutional, retail and family office investors.
The Bond is secured against assets held by the Alpha Property Fund, which aims to achieve long-term capital growth by investing in a diversified portfolio of residential freehold and leasehold UK property assets.
The quarterly income (or coupon) from the Bond is generated from the stable and regular rental income of the Fund’s tenanted properties. Any gains or losses to the property portfolio are attributed to the shareholders of the Fund.
The Bond is a debt instrument and as such, bondholders take preference over shareholders, providing added security.
By issuing a debt instrument the Fund aims to raise money to reduce its reliance on bank borrowing while continuing to increase the size and stability of its property portfolio.
The Fund has invested 71 per cent in purpose-built flats, 11 per cent in converted flats and 18 per cent in terraced houses in the South East of England.
Bill McClintock, Director of Horizon Asset Management and the Fund, says: “Investors are increasingly seeking income and a return of 5 per cent per annum is an outstanding proposition in the current savings and investment environment. The fact that the capital is secured against a real asset base should also be highly reassuring to investors.
“We are seeing some great opportunities in the UK residential market and this is a cost-effective way to enhance returns for investors in the Alpha Property Fund, too.”
The minimum investment in the Bond is GBP5,000 and is available directly or through wrappers such as fund platforms, personal portfolio bonds, Qualified Recognised Overseas Pension Schemes and Self Invested Personal Pensions.
The Fund is an exempted company (OEIC) domiciled in the Cayman Islands and registered as a Regulated Mutual Fund. It was launched in December 2007 with institutional capital and was registered as a mutual fund in February 2015 to broaden the range of its investor eligibility. The portfolio is predominantly residential and the objective has been to acquire properties in densely populated areas of the South East of England that generate high rental yields. It has returned 7.67 per cent return over the past 12 months and an annualised return of 7.31 per cent since launch.