Abbey and Capita launch property derivative fund

Abbey Financial Markets and Capita Financial Managers have launched the UK's first open-ended residential property derivatives investment fund.

The CF Abbey House Price Plus Fund is a non-Ucits retail scheme (NURS), and is designed to outperform the Halifax House price Index (HHPI) over the longer term of typically three to five years.

The fund will buy a portfolio of property derivatives in and around the HHPI and will be trading them with other market makers in the house price options market. Its performance against the index will be measured by the share price of the call options being traded, compared to the HHPI.

Abbey has set up Neried Investment Funds, a NURS and open-ended umbrella company able to hold several sub-funds, in which to hold the CF Abbey House Price Plus Fund.

Abbey National Asset Managers will act as investment managers, while Capita Financial Managers will be the authorised corporate director.

As there are various types of HHPI, the fund will be linked to the “All houses, all buyers, non-seasonally adjusted” index, which means it is linked to a price changes across a wide set of properties which is balanced both geographically and by property type.

The minimum investment in the Fund is £3,000, and then £1,000 for subsequent investments, tit also carries an initial charge of 3% and an annual management charge of 1.5%. The fund will only buy call options as its investment objective is to out-perform the HHPI, not provide any sort of absolute return or complex pay-off.

Trustees of Self Invested Personal Pension (SIPP) and Small Self Administered Scheme (SSAS) arrangements can invest in the fund, and it can also be invested directly as an OEIC, or through a mini/maxi stocks and shares ISA, or by transferring existing ISA/PEP funds into the plan.

Mike Brown, head of business development at Abbey Financial Markets, says: “Residential property was one of the most talked about investments within the new pension regime. For SIPP and SSAS members disappointed by the Chancellor’s recent pre-Budget statement, the House Price Plus fund offers them exposure to the UK housing market without all the associated hassle and cost – such as void rental periods, difficult tenants and substantial start-up costs.”

Although this the first property derivatives open-ended investment fund in the UK, this is the second such launch by Abbey in the last six months.

It announced in September 2005 (see IFAonline story: Abbey structured product focuses on prooperty) the unveiling of a 10-year retail property structured product, marketed by Knight Frank, which would pay out the 'upside' by comparing the level of the index on 21 November 2005, with the average of the 12 published monthly index levels preceding 20 November 2015.

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