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Client needs FAQ

The TM Hearthstone UK Residential Property Fund has been created to meet a wide range of financial needs. One or more of these profiles may apply to your clients.
  • How does Residential Property support portfolio risk reduction and diversification?
    Combining asset classes whose returns have little or no correlation with each other serves to reduce volatility and enhance the risk / return characteristics of a portfolio.
    Residential property has demonstrated that over the medium to long term it has minimal correlation with equities, fixed interest and cash. Its primary characteristics of low volatility and excellent total returns means that residential property can make a very significant contribution to a diversified investment portfolio.
  • What is the benefit for First Time Buyers?
    The challenge facing would-be first time buyers is that of building up a deposit to put down on their first property.

    Recent research conducted by the Council of Mortgage lenders states that the average age of an unassisted first time buyer is currently 33*, and according to Santander the average deposit is 17% (£37,375)**.

    The favoured method of accumulating the deposit for future house purchase has been to use a bank / building society account. However, would-be buyers have historically found themselves chasing a moving target as property values and therefore the capital required for a deposit have increased faster than they can save, and at a rate above the return they have received on their cash.

    Parents and grandparents now appreciate the challenges children will face when wishing to step on the first rung of the property ladder and an increasing number are looking for ways to provide financial assistance.

    Hearthstone’s residential property fund can provide an ideal inflation –hedge solution: Returns will be closely correlated to the movement in house prices, and investors can contribute from as little as £1000 single premium or £50 per month. The fund can also be purchased in ISA or Junior ISA wrappers, so sheltering the returns from tax. The ability to access savings at short notice is also an advantage of the fund.

    Source: * CML Regulated Mortgage Survey; ** Santander Mortgages
  • Is the Fund suitable for cash Investors looking for more return?
    Returns on bank and building society deposits are at an all-time low, and not keeping pace with inflation. A diversified residential property fund such as Hearthstone’s may offer an alternative home for some of a client’s portfolio in the pursuit of increasing their overall returns.
    As a cash investor is likely to be one who is risk averse, they would typically wish to avoid funds that are illiquid, or highly geared, or invested in volatile assets. The Hearthstone Residential Property fund is designed to be able to satisfy the liquidity requirements necessary for an authorised ‘retail’ fund, employs no gearing as part of its investment strategy, and invests in a diverse portfolio of UK residential property which has historically demonstrated low volatility.
    Being a real asset also provides the prospect of retaining exposure to inflation over the medium to long term.
  • Why might Buy To Let Investors be interested?
    There are a number of reasons why buy to let investors may be attracted to the Hearthstone fund. Those who:

    • Are committed to the asset class, and would like to use the fund to access residential property investment within tax efficient wrappers such as ISA, SIPP or Offshore Bonds.
    • Wish to diversify their portfolio of physical property exposure across a wider geographical area and property types but do not have the time or resources to manage an extended portfolio. Hearthstone’s fund provides mainland UK wide exposure, managed by experienced property professionals.
    • Have decided to withdraw from actively managing their own physical portfolio of buy-to-let properties but are still committed to the asset class.
    • Have been unable to refinance their current buy to let mortgages due to changes in lending criteria, but wish to continue investing in residential property assets. The Hearthstone fund will enable them to reinvest the disposal proceeds of their current assets and continue their participation in the asset class.
    • Would-be buy to let investors who do not have the time, capital, or experience to be successful private landlords. The fund enables them to participate in the residential sector without the issues associated with buying their own properties
  • What are the benefits for direct property investors seeking diversification?
    This type of investor may be:

    • an owner occupier
    • an existing buy to let investor
    • or one who owns commercial property assets
    A client who has a significant amount of capital invested in one or two properties is exposed to the risks associated with lack of diversification. A local planning decision, change in local economic situation, or even environmental issues such as increased flood risk could have an impact on the value of their current investment. As the Hearthstone fund is diversified across the UK, and invests in a large number of properties, this reduces the specific impact that local factors can have on the client’s overall property exposure.
  • How can an overseas investors or expatriate take advantage of UK residential property?
    Many overseas investors will be attracted to the Hearthstone fund as it enables them to gain exposure to the UK residential asset class but without the commitment that owning, managing and maintaining a direct UK property would demand.

    Although many Brits leave the UK each year with the aim of retiring overseas and not returning, increasing numbers are finding they are eventually forced to return for reasons beyond their control. Retaining exposure to UK residential property provides a degree of reassurance that they would still have the ability to access the market if they did return to the UK.

    For Inheritance Tax (IHT) planning, holdings in Authorised Unit Trusts (AUTs) and Open-Ended Investment Companies (OEICs) are excluded property if held by an individual not domiciled in the UK or if held in a trust made by a settlor not domiciled or not deemed domiciled in the UK when making the trust. As such, the Hearthstone Residential Property Fund may enable qualifying investors to maintain exposure to the UK property market without liability to IHT. This may require use of an Excluded Property Trust.
  • What are the advantages for investors in ‘Property Share’ funds?
    There are a number of collective investment schemes that, although branded as property funds, are actually just invested in shares in property companies rather than having any direct property holdings. It is unlikely these investors will actually be getting property like returns – as they will be subject to equity market volatility in addition to the performance of the underlying assets. A property fund such as that from Hearthstone provides an alternative home for the client’s investment, and provides direct exposure to physical property assets, and the associated returns.

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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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