A start-up property fund management firm is planning to launch the first ever property authorised investment fund (PAIF).
The fund, which it hopes to raise £50m in its first year, is to be the first to be set up by Clavis Walden, a Piccadilly-based firm that was started up last year.
It is awaiting authorisation from the Financial Services Authority (FSA) to push the button on the launch of an income fund structured as a PAIF in a move that could pave the way for other fund managers to follow.
A PAIF structure is intended to provide investors with the tax benefits of a Real Estate Investment Trust (REIT), and was chosen by the fund manager in response to perceived demand for transparency and tax efficiency.
Property Week revealed in March that CBRE Investors was to be the first fund manager to convert an existing unit trust to a PAIF status.
However, since then no fund manager has been able to overcome the regulatory and corporate governance based hurdles that institutional fund managers have faced.
Ian Keys, managing director at Clavis Walden, said that the PAIF structure could provide a solution for open-ended retail property funds which have come under fire because they have suffered from redemptions and struggled to control their liquidity.
‘Open-ended funds in property are not dead,’ said Keys. ‘We are the first to set up a PAIF and think that the structure deals with the situation in the best and fairest way. Fund managers have learned from their past mistakes and PAIFs offer transparency, tax efficiency and limits to gearing that could provide a solution to investors.’
‘The decision to launch an income fund rather than a vulture fund led us to choose the PAIF structure – it was a common sense approach. Lots of funds have been launched to take advantage of distressed selling, and we just haven’t seen that much distress. A PAIF structure makes the most sense for income and will meet investor’s needs.’
To date, the fund manager has sounded out investors from charitable trusts, institutions, SIPPs investors and private individuals. It is proposing introducing different share classes for the different investor bases.
As part of the PAIF structure, the fund will be restricted to introducing debt at a 20% gearing.
It is targeting a gross dividend of 7% that it will make on a basis more frequently than the traditional annual basis.
Clavis Walden was founded by Keys who previously headed up the real estate team at London & Capital, and is also run by Robin Hill who was formerly of Rutley Capital Partners, and Jamie Farquhar who was came from F&C where he was head of retail distribution.
It hopes to get authorisation from the FSA to launch in October.