Guardian Managers, a London-based fund management company which specialises in real estate funds, is launching what it says is the first collective investment fund to focus on the shares of the UK’s 53 remaining building societies.
The sterling denominated Luxembourg-domiciled fund is being launched today and is being aimed at intermediaries whose clients include qualified domestic and offshore investors. The minimum investment has been set at the sterling equivalent of €125,000 (currently about £107,500).
The Guardian Permanent Income Fund will invest mainly in permanent interest bearing shares (Pibs) issued by the building societies and listed on the London Stock Exchange. It may also invest in Psbs – or perpetual subordinated bonds, which are like Pibs but are issued by demutualised building societies that are now banks – as well as profit participating deferred shares (PPDS), another variation.
The new fund will begin investing at the beginning of September, after attracting what Guardian says it expects will be assets of around £5m.
Guardian Managers investment adviser Paul Gleeson, who will manage the fund’s portfolio, noted that some institutional holders of Pibs recently have been forced to liquidate their holdings after rating agencies downgrading the sector. He said this has depressed prices and created opportunities that he plans to exploit.
“Our proprietary model selects the optimal spread and weighting of instruments to balance the income return against the capital security,” he added.
“This should suit investors looking for income in an environment of historically low interest rates, low dividend yields and an uncertain stock market.”
He said the fund will offer monthly dealing, in order to “help counter the illiquidity that has dogged this market in the past”.
TER ‘below 2%’ per annum
Guardian said it is aiming for an overall annual total expense ratio below 2%. There is an upfront sales fee of up to 5%, an annual management fee of 1.5%, and a 20% performance fee once a hurdle return of 7% has been reached.
Permanent interest bearing shares pay out twice a year, and Guardian said it was its intention to distribute the income of the fund twice yearly, gross of tax.
Gleeson said Guardian will initially focus on some 25 tradable Pibs out of a universe of about £2bn worth.
Net yields in the sector currently vary widely, from as low as 6% to over 20%, reflecting investor perception of the varying degrees of risk among the UK building societies. The stronger the society the lower the risk, and thus yield.
Founded in 1996, privately-held Guardian Managers has asssets under management of about €125m.
__________________________
IA FUND FACTS:
Name: Guardian Permanent Income Fund
Domicile: Luxembourg
Minimum investment: Sterling equivalent of €125,000 (currently some £107,500)
Type of fund: Absolute return Sicav
Upfront sales fee: “up to 5%”
Annual management fee: 1.5%
Performance fee: 20% of any gain beyond 7% hurdle
Launch date: 3 Aug 2009
Manager: Paul Gleeson
Target initial AUM: £5m
