Listed below are some of the most common questions we are asked both about the Fund and property investment. However, if you have a more specific query, please don't hesitate to contact us or send a question through our contact page.
Common Investment Funds are open ended investment vehicles, similar to unit trusts, but are designed specifically for charities and established under Section 23 of the Charities Act 1993. Common Investment Funds are themselves charities with schemes approved and regulated by the Charity Commission.
Charity investors have a significant advantage over all other investors in property thanks to their exemption from stamp duty (currently 4 per cent on all transactions over £500,000). However, most charities do not have sufficient funds to create a portfolio that is large enough to spread the risk of owning individual properties.
At present, a Common Investment Fund is the only indirect property investment vehicle that allows charities to take advantage of this exemption (and thus to receive better returns on their investment). As a registered charity, a Common Investment Fund is itself exempt from stamp duty. Unlike property unit trusts there is also no requirement to hold a certain percentage of the fund in cash or readily realisable securities.
In addition, Common Investment Funds can avoid many of the problems associated with some other types of indirect property investment. For example, some funds have complex structures and excessive charges, which are often obscured from investors. Sometimes these only emerge during or at the end of the life of the fund when investors realise that they have received a smaller return than they anticipated. Also, many have no secondary market or possibility of early exit, should investors' needs change.
Finally, charities can rest assured that Common Investment Funds are regulated and approved by the Charity Commission and are also transparent, providing regular reports and accounts so that investors can easily monitor their progress.
The Fund aims to provide an attractive level of income with the prospect of income and capital growth over the long term by investing in a diversified UK commercial property portfolio. The Fund invests in the three principal UK commercial property sectors: office, retail and industrial but does not invest in speculative developments.
Only charities in England, Northern Ireland, Scotland and Wales may invest in a Common Investment Fund.
In order to enable as many charities as possible to invest in the Fund, the minimum investment is £25,000. However, once you are a unitholder you will be able to 'top up' your investment with smaller amounts.
All you need to do is complete an application form and send it back to The Charities Property Fund at Lansdowne House, 57 Berkeley Square, London W1J 6ER. The original signed application form needs to be received at least 14 days prior to trade date. For further information on how to send your payment, or for an application form, please contact a member of the team on 020 3107 5439.
The Fund is valued on a quarterly basis at the end of March, June, September and December and therefore units in the Fund can be purchased on the last working day of these months. We do, however, find it helpful to know as soon as possible in advance of any investment in the Fund as this helps us to reduce the time that it takes to invest the money into the property market.
You will need to fill out a redemption form and post the original signed form to our addess at Lansdowne House at least 14 days prior to trade date. If you require a redemption form, please contact a member of the team on 020 3107 5439.
Normally we will try to redeem your units on a quarter day as we will always hold a small amount of cash on deposit. To increase liquidity, we have also created a secondary market where we can match sellers with buyers. However, in order to protect unitholders we have set out clearly defined procedures in the Scheme Particulars where there might be difficulty redeeming on the first quarter day.
To ensure that investors benefit from economies of scale, the majority of fees are on a sliding scale so that as the Fund grows the total costs of managing the Fund will continue to fall. At a Fund size of £350 million, we calculate the annual total expense ratio - which encompasses all the running costs of the Fund, including administration, property management, corporate trustee, audit and legal fees - to be around 0.6 per cent of the total Fund value. This compares favourably with other Property Unit Trusts and reflects the Charity Commission's desire to see vehicles providing a cost-effective way for charities to access property as an investment class.
The income is paid gross on a quarterly basis, six weeks after each valuation point (15 February, 15 May, 15 August and 15 November). For new investors, their first payment will be in the quarter following their investment (i.e. four and a half months after their investment).
Each year, all investors receive both an interim report and annual report. In addition, we also provide a quarterly factsheet as well as regular newsletters covering a variety of topics concerning the property market. Copies of these are also available in the news and publications section on this website. We also hold an annual meeting for unitholders where we give a presentation on the Fund and our outlook for the property market.
The Fund is priced quarterly at the end of March, June, September and December. The full unit price and distribution history is available on this website or by downloading the latest factsheet. In addition, the current unit price and historic yield is published daily in the Financial Times. The Fund also appears in the WM quarterly Common Investment Fund Survey. Details of this are published regularly in Charity Finance magazine.
From the outset, we wanted to be able to help charities that owned only a few direct investment properties gain access to a more diversified and balanced portfolio and reduce the costs of managing these properties by allowing them to transfer their properties into The Charities Property Fund. Even for charities with larger portfolios, in specie transfer is a cost-effective way of investing in the Fund, with the charity usually able to avoid paying a sale fee. However, it has always been of paramount importance to protect the interests of the existing unitholders and not let the Fund become a dumping ground for properties that do not fit the investment strategy.
Although the Fund has now been offered more than 60 properties, only twelve have been accepted for in specie transfer. A number of investors have, however, made use of our offer to sell their property investment for a discounted fee of 0.75 per cent, providing that the proceeds are invested in the Fund.
As all the unitholders are charities and the main aim of the Fund is to maximise income, we do not believe that it is appropriate for the Fund to become involved in speculative development. However, we have already taken advantage of our ability to engage in 'forward commitment', when we entered into a contract with a developer to purchase a property at an agreed price once it had been built and the lease completed to the tenant who had agreed to take the property.
As the Fund is designed specifically for charities, we do not believe that it is appropriate to increase the risk to them by gearing, a process whereby funds borrow money to boost the amount they can invest. In some other types of property funds, gearing can amount to as much as 40% of the value of the fund but while this can enhance gains in a rising market, it can magnify losses if returns fall. However, at least one charity has chosen to gear its own investment in the Fund by taking advantage of the current cheap long term borrowing rates. If we know, however, that substantial funds are going to be invested at the end of a quarter and a suitable investment opportunity has arisen that is time critical, the Fund has the ability to take a short-term bridging loan of up to 10 per cent of the value of the Fund to facilitate the purchase.
The returns from property company shares tend to move more in line with equity markets and therefore do not provide the diversification benefits of owning direct property. Income yields are also materially lower and therefore, in order not to dilute the Fund's income profile, the Fund does not invest in property company shares. We have also found that most charities have an exposure to these companies through their traditional equity investment portfolios.
As it is not the Fund's remit to judge how much of your investment should be in cash or property, it is our intention to remain as fully invested as possible. In practice, however, we are likely to have some cash on deposit for liquidity purposes and because it is unlikely that investments will be of an exact lot size to utilise all the cash.
At the same time that the Fund was launched, an Advisory Committee was set up to provide an ongoing review of the structure and performance of the Fund, taking into account the outlook for the property market and any special factors that may affect the Fund. The Committee meets on a quarterly basis and all the members represent charities that are unitholders in the Fund. The current Committee comprises Ian Flanagan as chairman, formerly a senior partner of Hillier Parker, he is Trustee of a number of charities and his interest in charity work started on election as an Almoner of Christ's Hospital, then to Childline and Perennial - The Gardeners' Royal Benevolent Society; Miles Jolly, trustee of the Lincoln Diocese, one of the Fund's largest investors; Ben Ruck Keene, the bursar at Corpus Christi College, Oxford and chairman of the University Property Committee; and Nick Downer, the bursar at Selwyn College, Cambridge. The Committee members are always happy to talk to any charity considering making an investment in the Fund and their contact details are available on request.
As a Common Investment Fund, the Fund is prohibited from adopting a specific ethical policy as it would be too difficult to represent equally the views of all the investors. However, we remain sensitive to the need to maximise returns while not investing in properties whose tenants could potentially cause embarrassment to our unitholders.
There is no doubt that as an investment, property is not as liquid as cash, equities or bonds. However, for most charities property will only form a small part of their overall portfolio. Liquidity should therefore be measured across all of your investments rather than in isolation. Concerns over liquidity, the costs involved in managing direct property and the minimum size needed to create a diversified portfolio have been some of the main driving forces behind the growth in a rapidly increasing number of indirect investment vehicles (including Common Investment Funds). This has opened up the possibility of property investment to many more investors, the key benefit of which is that liquidity should increase in the marketplace.