Investing in Ground Rents

Jonbvn

I have come across a fund/trust which provides investment in ground rents.

http://www.time-investments.com/fiaf/

This would provide good diversification for our portfolio. Over the financial crisis, this fund has never waivered.

I'm struggling to see any downside, so I thought I would post here. Anybody have experience?

TIA:beer:

Reaper

Looks interesting. I assume you have checked the "Risks" page and noted what is there, such as the potential difficulty selling.

One risk not mentioned is inflation and it is not clear to me from my quick scan of the documents whether all the ground rates purchased have escalating rates and if so on what basis.

EDIT: Ah I just found this in the factsheet which reveals they do have partial inflation protection:

77% of FIT’s freeholds have a form of inflation protection through periodic uplifts linked to Retail Price Index (RPI), property values or fixed uplifts.

Ark_Welder

Trading is one potential issue: it is monthly, not daily. I see this as a good thing given that the assets have less liquidity than the likes of equities, because it should allow a lower level of cash to be held: fund purchases and redemptions can be netted off against each other once a month, so the situation should be more predictable for the manager to decide whether assets need to be sold or not to meet redemptions.

The fund manager is not authorised to deal directly with the retail mareket, so the route in is either through one of the platforms that does have this fund, or to find a friendly IFA that is prepared to follow your instructions... Alternatively, if you are able to certify that you are a Professional Investor, direct dealing is possible (although PI certification is more of a Catch 22 these days).

An alternative to look at is the Ground Rents Income Fund (ticker GRIO) which was listed on the LSE late last year, therefore providing intra-day dealing. The downside with this - as with all listed investment companies - is that its price is determined by investor demand, so it can trade at a discount or premium. Currently, the latter.

Both of these funds were UCIS, but have taken different routes to becoming authorised. From what I remember of them both a few years ago, when still UCIS, is that the net asset performance of pre-FIAF was superior to pre-GRIO. Not to say that that will be the same going forward, however. And I could be wrong as I don't have the relevant documentation around any more.

kidmugsy

You can't hold it in an ISA, which is a bit of a beggar for an income investment.