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Portfolio guidelines

The guidelines for the overall Fund portfolio are:
  • At least 85% of the portfolio should be invested in residential property. The remaining 15% is held for liquidity purposes in a combination of cash and other liquid investments. These are carefully planned such that, taken as a unit, they will broadly reflect the returns of an ungeared physical residential property investment. This may be achieved by holding a basket of residential related equities such as house builder shares or limited holdings in other collective investment schemes and combining with a cash holding to reduce volatility.
  • None of the properties will be mortgaged. There is potential for a credit facility of 10% of Fund size available for periods of excessive redemption pressure, used to bridge redemption points through to underlying property sales.
  • The portfolio will aim over the long term to be invested according to the regional and type distribution of value of the UK housing stock. For example, around 20% of UK housing, by value, is held in property in London; to better track the performance of the UK housing market the Fund will aim to invest 20% by value in London. Approximately 50% of London housing is flats: the Fund will aim to hold the same proportion in its holdings in that region. The Fund will also aim to invest in assets that are representative of the region by price, with a Fund average house price not exceeding that of the UK mainland market, taken as a whole. 
  • The Fund will invest primarily in low-maintenance, new build properties in areas with high rental demand and a history of strong capital growth. Properties will be selected on a long term ‘buy and hold’ strategy, although the Fund has the flexibility to divest underperforming parts of the portfolio, as well as scaling up others. Trading and “churn” will be minimised while maintaining an appropriate divestment strategy for non-performing assets.
These guidelines are not absolute and the Fund may temporarily deviate from the above allocations should investment circumstances dictate. By virtue of being an actively managed fund, the portfolio of assets that the Fund holds is potentially able to avoid properties with a negative growth profile or a high probability of poor future performance, unlike the LSL Acadata UK house price index. This flexibility allows the manager to select only stock that will positively impact the portfolio performance and increase the likelihood of outperforming the Fund’s benchmark.
PAIF investment and borrowing restrictions also apply, and are outlined in the prospectus.

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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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