Brandeaux Funds Update - January 2009 Following our meeting last week with Brandeaux we are in a position to update you. Since the funds were suspended they have continued to be valued and the Student Accommodation’s unit price has increased by 2p, with the Ground Rent’s rising by 1p, 2p or 3p depending on which fund you are invested in. The suspension has not affected performance.
Brandeaux are committed to having all of the funds trading again as soon as possible and will start by re-opening the Student Accommodation fund in the second or third week of February.
A new share class will be created and this will allow us to begin investing a considerable amount of our clients’ new monies into the funds. The new share class will invest in the same underlying Student Accommodation assets and performance will mirror that of the old share class.
Importantly, the new share class will have stronger redemption terms, designed to protect the long-term investors from the potential damage that could be inflicted by those with a “short-term” agenda.
There will be a six-month notice period on any redemption/sale requests. From day one, there will also be a six-month period during which a client will not be able to make a sale request. Investors who cannot foresee a 12-month minimum initial investment, should stay in cash and not invest in a longer-term asset like this.
These new terms are, in our opinion, an essential measure and they will enable Brandeaux to manage the cashflow of the funds in a more orderly manner. This helps allay the concern that we have that they could become forced sellers if they receive significant redemption requests, over and above the level of cash held in the funds (and received by the funds in rents). Under the new terms they will have six months to plan disposals in an orderly fashion, as opposed to the 14 days they had previously. A forced sale inevitably leads to assets being sold at knock down prices.
Once the new share class for the Student Accommodation fund is up and running, clients in the old share class will be switched into the new share class without cost. All clients will then be subject to the new redemption terms, but this will go a long way to “unlocking” the current situation. It is anticipated that this will have been completed by the end of March.
Brandeaux will then work on the Sterling, Euro and Dollar funds (Ground Rent and Student Accommodation). The final round will consolidate the three Ground Rent funds into one and create a new share class as with the other funds. The entire process will take some months. Brandeaux are keen to move ahead as quickly as possible to support their investors and to enable then to take advantage of the huge opportunities that are present in the market today.
As the new share classes come on stream, we will be in contact again to offer each and every client the opportunity to review their portfolio in light of the new terms. For investors requiring growth it will make little difference. For those that draw income we will need to plan more carefully but this is something we can co-ordinate for you.
Finally, our meeting last week with Kay Brandeaux reassured us that the funds remain solid investments. The Student Accommodation returns are strong because increased rents have now been secured for the 2009/10 academic year, occupancy is almost 100% and the bad debts continue at less than 1%. The Ground Rents should grow steadily albeit at a slightly lower rate than in 2008, but given the Bank of England base rate has fallen from 5.5% this time last year to 1.5% today, there should still be a healthy margin above what we might receive from a savings account.
If you have any questions please call one of us on the usual number and I will be in touch again once the new share classes are available.
Chris Birch
Director
26th January 2009
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