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Qualitative analysis

Taking the theoretically optimal regional weighting and key locations from the model, the investment team reviews the selections for economic outlook, growth potential, housing supply and a host of other criteria. Each location the team invests in will typically meet these three selection criteria:

  • Above-average capital growth characteristics relative to those of the region of which it forms a part.
  • An established or developing rental market.
  • Good historic and projected rental growth prospects
 
Every week the team reviews data on regional rental strengths and market performance provided by our acquisition agents, Connells, and managing agents, Touchstone. This data is combined with our in-house analysis of factors such as economic performance, mortgage financing and government initiatives to select the most appropriate areas for investment.  Our acquisition agents seek to identify suitable, available stock in these areas, producing a due diligence report and supporting analysis for each opportunity. Where appropriate, the Fund will leverage its position as a volume, cash buyer to obtain discounts on purchase prices, which can be factored into the ultimate purchase decisions.
 
Should a property meet our requirements for type, location, yield and capital growth potential, an initial purchase recommendation will be made to the internal Deals Committee. If approved by the Deals Committee, the Fund manager will commission a formal valuation of the prospective acquisition by the Standing Independent Valuer, an external firm of Chartered Surveyors specialising in residential property valuation. This valuation, the due diligence pack and the investment recommendation are then passed to the Investment Committee to approve the purchase.
 
The Fund manager and assistant Fund manager conduct additional research on markers for regional growth and identify purchase opportunities beyond our agency network. They examine the forecasts and assumptions of other researchers, and compare the conclusions with their own work. The team will typically conduct over 50 meetings a year on asset selection.
 
The team’s sell disciplines are essentially the opposite of their acquisition selection criteria. They will sell a property if:
 
  1. they believe it is no longer likely to produce sustained above average growth or provide an attractive yield;
  2. it no longer represents a ‘best fit’ within the overall balance of the portfolio; or
  3. that alternative stock is available in the same region that would exhibit superior return characteristics. 

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Hearthstone Investments PLC is the parent company of the Hearthstone Group. Regulated activities associated with the TM Hearthstone ICVC are carried out by Hearthstone Asset Management Limited, which is an authorised representative of Thesis Asset Management Limited, authorised and regulated by the Financial Conduct Authority (114354). Other companies in the group provide investment advisory and other services funds aimed at professional clients. Details of these companies are provided in the investment materials associated with each fund.

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