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Suspension of two more property funds may hit expats worldwide
| Published: | 25 Oct at 6 PM |
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Following the suspension of the Brandeaux range of property funds in late July and October’s news that the Mansion Student Accommodation fund is also suspended, expats with investments in the sector are bracing for the worst.
Questions are now being asked as to whether the property sector is an appropriate investment, especially for expat retirees. Earlier this year, Harlequin Properties, which marketed its off-plan Caribbean luxury villas as SIPPS investments, called in the administrators and, more recently, the Australia-based LM mortgage fund collapsed causing huge losses to investors.
Mansion was popular at its inception for its published high returns, averaging around an eye-watering 30 per cent in 2010, its first year. Subsequently, in 2011 returns dropped to 14.2 per cent and ended 2012 at 9.75 per cent, with forecasts for 2013 as low as 4.9 per cent.
Offshore fund management experts believe the fall, was due to the ballooning size of the fund and the narrowing relative impact of each new construction on annual returns. Whatever the reason, investors began pulling their money out in an escalating rush and the trickle became a flood which exhausted the fund’s cash reserves.
The fund is now closed, trapping investors’ cash, and the suspension was backdated to 1 October. According to its director, Graham Basham, cash reserves ran down faster than income and, in July, held just 10 per cent of net asset value, necessitating refinancing efforts.
The situation is similar for the large number of investors who have been attempting to withdraw their cash from the Brandeaux range of funds for as long as two years. The fund managers’ response to the rush for the exit was to suspend all the funds, and later to downgrade the net asset value of its student accommodation fund by 4 per cent.
Questions are now being asked as to whether the property sector is an appropriate investment, especially for expat retirees. Earlier this year, Harlequin Properties, which marketed its off-plan Caribbean luxury villas as SIPPS investments, called in the administrators and, more recently, the Australia-based LM mortgage fund collapsed causing huge losses to investors.
Mansion was popular at its inception for its published high returns, averaging around an eye-watering 30 per cent in 2010, its first year. Subsequently, in 2011 returns dropped to 14.2 per cent and ended 2012 at 9.75 per cent, with forecasts for 2013 as low as 4.9 per cent.
Offshore fund management experts believe the fall, was due to the ballooning size of the fund and the narrowing relative impact of each new construction on annual returns. Whatever the reason, investors began pulling their money out in an escalating rush and the trickle became a flood which exhausted the fund’s cash reserves.
The fund is now closed, trapping investors’ cash, and the suspension was backdated to 1 October. According to its director, Graham Basham, cash reserves ran down faster than income and, in July, held just 10 per cent of net asset value, necessitating refinancing efforts.
The situation is similar for the large number of investors who have been attempting to withdraw their cash from the Brandeaux range of funds for as long as two years. The fund managers’ response to the rush for the exit was to suspend all the funds, and later to downgrade the net asset value of its student accommodation fund by 4 per cent.
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