First time a UK-authorised international direct commercial property fund will be available to UK retail investors in a tax-efficient manner
New Star Investment Funds has announced plans to launch a fund that will offer UK investors access to international direct commercial property.
The new fund, which will be called the New Star International Property Fund, will be the first in the industry to allow UK-retail investors to hold international direct commercial property within an FSA authorised retail fund in a tax-efficient manner.
The decision to launch the fund follows discussions with the FSA, which has granted New Star a modification to the rules. The modification allows the fund to be structured in a tax-efficient manner. New Star plans to launch the fund in early summer with a three-week offer period running from 14 May to 4 June.
The New Star International Property Fund will invest in commercial properties outside the UK, with the initial focus on Western Europe, Central Europe, Japan and the rest of Asia. The fund will be managed by New Star's property team, headed by Roger Dossett. The team manages £1.9 billion of UK commercial property and almost $1 billion of international commercial property.
John Duffield, chairman of New Star Asset Management, says:
"UK commercial property has emerged as a mainstream asset class in the retail investment market over the last five years. This has been largely due to the ability of direct commercial property to add diversification to investors' portfolios. The launch of the New Star International Property Fund is a natural extension of this search for further diversification.
"Until now the only way that retail fund investors have been able to access commercial property outside of the UK has been through international property shares or REITs. These, of course, lack the low volatility and level of diversification that bricks and mortar funds can offer. I am delighted that through the New Star International Property Fund we are opening up a brand new investment area to UK investors."
Roger Dossett, head of New Star's property team and manager of the New Star International Property Fund, says:
"The New Star International Property Fund will aim to hold approximately 80% of its assets in direct commercial property. We believe that Continental Europe and Asia offer significant opportunities. We initially plan to acquire buildings in Western Europe, Central Europe, Japan and elsewhere in Asia.
"While many investors are well aware of the New Star Property Unit Trust, which focuses on UK commercial property, they may not know that my team already manages almost $1 billion of international property through a specialist institutional fund. We are highly experienced at acquiring and managing properties in the international arena, particularly in the countries that we are targeting for this new retail fund. We work closely with some of the world's leading property advisers including CBRE and DTZ to ensure that we acquire properties that match our investment criteria.
"I believe the requirements for successful international property investment are broadly the same as for the UK. The key is to find properties let to high quality tenants on strong leases with good prospects for rental growth. The real investment benefit of going international is the ability to access countries' property markets at different stages of their economic cycles."
An important aspect of the New Star International Property Fund is its structure, which has been designed to be as tax-efficient as possible.
This structure means that income from the fund is distributed as an interest distribution as with a bond fund. Eligible investors will be able to receive the income either gross or reclaim tax withheld on the distribution. For example, for retail investors, income paid as an interest distribution is tax free within an ISA, PEP transfer and a SIPP.
Phil Wagstaff, managing director of UK retail sales & marketing at New Star, says:
"Initial reaction to the New Star International Property Fund from the intermediary market has been encouraging. The new fund represents the next step in the growth of commercial property as a core asset class, similar in a way to when the first international equity or international bond funds were launched some years ago.
"It is quite rare for something genuinely new to come along in today's highly-developed investment markets. I believe that the launch of the New Star International Property Fund represents one of these occasions.
"The combination of an experienced management team offering access to international bricks and mortar within a familiar and tax-efficient structure is, I believe, an attractive proposition for advisers and their clients."
Fund details:
| Fund name: | New Star International Property Fund |
| Investment objective: | To achieve long-term capital growth and income |
| Structure: | Non UCITS Retail Scheme (NURS), dual-priced OEIC, income shares |
| Base currency: | Sterling. Exchange rate risk will be hedged on property investments. |
| Approximate asset split: |
80% physical property, 15% international property securities/REITs, 5% cash |
| Initial property portfolio: |
Direct property across Western Europe, Central Europe, Japan and the rest of Asia. At launch the target is to hold a minimum of 10 properties at an average value of $20 million. |
| Fund managers: | Roger Dossett, head of New Star's property team will be lead manager and manage the physical property component of the fund. Robin Carr (Europe) and Simon Tyrell (Asia) will assess opportunities within their specific regions. Gregor Logan, New Star's joint chief investment officer, will manage the property securities and cash components. |
| Advisers: | CBRE - European property DTZ - Asian property KPMG - tax and audit Freshfields Bruckhaus Deringer - legal adviser for property Eversheds - fund legal adviser RBS - depositary |
| Sector: | IMA Specialist |
| Charges: | Initial 5%. AMC 1.75% charged to capital |
| Estimated bid-offer spread before charges: | 5.0%. Quoted spread on an offer basis is expected to be 0.25% plus initial charge. |
| Total expense ratio: | Estimate 2.0% |
| Investment methods: | Lump sum (min £1,000) Regular savings (min £100 per month) ISAs, ISA & PEP transfers |
| Income distributions: | Income distributed will be deemed as an interest distribution for UK tax purposes. Bi-annual distributions on 31 May and 30 November. |
| Estimated yield: | Approximately 4% gross. |
| Pricing: | The fund will be priced daily on a forward basis at 12.00 noon. |
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For further information please contact:
Ben Robinson New Star 020 7225 9294
Phil Wagstaff New Star 020 7225 6076
Richard Wilson New Star 020 7225 9575
Denise Lyttle Polhill Communications 020 7655 0540
New Star Investment Funds website is www.newstaram.com
Important information:
Past performance is not necessarily a guide to future performance. The value of investments and any income from them may fall as well as rise and investors may not get back the amount originally invested. The value of investments may also increase or decrease as a result of changes in exchange rates between currencies. This may increase the risk to the investor. Management charges for the New Star International Property Fund will be taken from capital and capital growth will therefore be restricted. The New Star International Property Fund invests in a specialist sector, which may be less liquid and produce more volatile performance than an investment in broader investment sectors.
Whilst it is New Star Investment Funds' intention to market this fund to UK retail investors, the nature of the fund's investments involves certain risks and the fund may employ various investment techniques, such as leverage and the use of derivatives, which may carry additional risks. The fund could be subject to losses if it holds a large position in a particular property or region that declines in value or is otherwise adversely affected. The fund may be more vulnerable to particular geographic, economic, political, regulatory or other developments - including those in more volatile emerging markets - than would a more diversified investment. This is a long-term investment.
This document does not constitute an offer or solicitation to anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such an offer or solicitation.
New Star Investment Funds is the trading name of New Star Investment Funds Limited, part of the New Star Marketing Group. New Star Investment Funds is not authorised to give investment advice and only provides information on New Star products. For your protection, calls may be recorded and monitored. Issued by New Star Investment Funds Limited, authorised and regulated by the Financial Services Authority.