The Housa An investment that tracks house prices

Transcription

1 The Housa An investment that tracks house prices New solutions to old problems

2 What is a Housa? The Housa is an investment product that allows you to obtain returns directly linked to the Halifax House Price Index (the Halifax Index), for the first time. The Halifax Index is an independent measure of UK house price inflation and is published every month by Lloyds Banking Group. First published in January 1983, it s the UK's longest running monthly house price survey covering the whole country. The Halifax Index is derived from the mortgage data of one of the country's largest mortgage lenders, which provides a robust and representative sample of the entire UK market. Whichever Housa you choose you can be certain that it will either track or outperform the Halifax Index. Housas are available in a range of investment terms (3, 5 and 10 years) and in three formats Growth, Income and Protected. Castle Trust is based in the City of London and is regulated by the Financial Conduct Authority (FCA). Castle Trust s directors include Sir Callum McCarthy, former chairman of the FSA and The Rt. Hon. John Gummer (Lord Deben), former Secretary State for the Environment. Investors in Housas are eligible for protection by the Financial Services Compensation Scheme of up to 50,000 per individual. Most Housas can be applied within an ISA or SIPP and you can invest from as little as 1,000. 1

3 Why should you invest in house price movements? Did you know that, at over 4 trillion, the UK s residential housing market is the largest UK asset class? And one of the most stable? Historically, the annual returns of the Halifax Index sit at about 6%, which is comparable with equities (but with much less volatility) and very attractive against cash, gilts and bonds. Housing has delivered higher risk adjusted returns and lower volatility than equities, corporate bonds or commercial property. As is clear below, since February 1999 the Halifax Index has shown greater and more stable returns than the FTSE All Share (though past performance is not a reliable indicator of future performance): 2

4 Why should you invest in a Housa? Saving for a mortgage deposit The Housa can be an ideal way to save for a deposit, for you or perhaps for younger relatives. This is because your investment is aligned with UK property prices so if the Halifax Index increases, your investment will increase by at least the same proportion. For example, the 5 Year Growth Housa has risen in value by 9.91% from inception (October 2012) to January Please remember, however, past performance is not a reliable indicator of future performance and you might get back less than you invested. If you are saving to buy a house, please use the calculator on our Housa website to forecast how much money you might need as a deposit at your chosen date in the future. An alternative to buy to let Not everyone is able to, or wants to, own investment property. Until recently, buy to let was the only way to invest in residential bricks & mortar. Buy to let investment is time consuming and complex. You have the hassle of finding a property, purchasing it, often furnishing it and then letting it. If you choose to manage the property yourself, you are exposed to the prospect of calls at all hours of the day and night. There are notable risks associated with buy to let: picking the wrong property, failing to find a tenant or, worse still, finding a bad tenant who fails to pay rent and damages the property. As the Housa tracks an index it eliminates individual property specific risk. Your Housa investment is eligible for protection up to 50,000 by the Financial Services Compensation Scheme (in the unlikely event that Castle Trust is unable to meet its financial obligations). Buy to let investors also face a range of incremental costs. Typically the investor will pay an agent to find a tenant, which means that rental income can get eaten up in fees and commission that s very expensive if the tenant leaves, as is their right, after six months. Housas eliminate the risk of rental voids and there are no initial or annual charges. You can hold your Housa within an ISA or SIPP, unlike investments in buy to let. Finally, you can invest in a Housa for as little as 1,000 or as much as 1,000,000. Investments in excess of 1,000,000 are by special arrangement. Diversifying your investments or property portfolios UK housing, as an asset class, has low correlation with the price movements of other major asset classes. This makes a Housa a great way of ensuring you have a balanced investment portfolio, complementing traditional asset classes such as equities. Our research suggests that the risks of a 20% loss to investors in UK equities or commercial property during a 5 year term are 16% and 13% respectively, but that for a 5 year Income Housa it is less than 1%. This illustrates how a Housa can add a unique, stabilising element to your portfolio. But, again, please remember that as with equities, commercial property and bonds, there is a chance you might get back less than you invested. The Housa also adds a new form of diversification within property investments, so you can spread your risks within the property sector. Unlike property funds, there are no upfront or ongoing management fees. 3

5 What is the Income Housa? The Income Housa is designed for investors who want stable, long term income with exposure to house prices. This Housa might be appropriate, for example, for someone seeking to supplement income in retirement. The available terms for the Income Housa are 3, 5 or 10 years. The Income Housa enables you to share in the performance of the Halifax Index, with a quarterly income. The level of income you receive depends on the investment term you select. Paid quarterly, annual yield is: 2% for 3 year terms, 2.5% for 5 year terms and 3% for 10 year terms. The price of the Income Housa at the end of the investment term is directly linked to the move in the Halifax Index, so the amount you will receive will be your original investment adjusted for any rise or fall in the Index over the term. The income is subject to Income Tax unless it is held within an ISA or SIPP (sorry, the 3 year Income Housa is not eligible for an ISA). Here are some examples of potential returns on 1,000 initial investment:* 3 Year Income Housa Index % Capital at Income Total return change maturity during term at maturity +20 1, , , , , , Year Income Housa Index % Capital at Income Total return change maturity during term at maturity +20 1, , , , , , , Year Income Housa Index % Capital at Income Total return change maturity during term at maturity +20 1, , , , , , , ,100 The average Halifax Index change over all 10 year periods since inception of the Index is +88%. The total return (including yield) on a 1,000 Income Housa investment in these circumstances would be 2,180. But please remember that past performance is not a reliable indicator of future performance. *The potential returns shown are not a reliable indicator of future performance. 4

6 What is the Growth Housa? The Growth Housa is designed for investors who wish to concentrate on capital growth. For example, this Housa might suit a grandparent saving for a grandchild. The available terms for the Growth Housa are 5 and 10 years. If the Halifax Index rises, the return on your investment will be 150% of the growth of the Index over 5 years, and 170% over 10 years. The Growth Housa is designed to provide some cushioning to your investment loss if the Halifax Index falls during the term. Should the Index fall, your loss is limited to 50% of the fall on the 5 year Growth Housa, and 30% of the fall on the 10 year Growth Housa. This loss would be deducted from your original investment, and you would receive the remaining capital at the end of the term. Gains on the Growth Housa are subject to Capital Gains Tax, unless you choose to hold it within an ISA or SIPP. The Growth Housa returns are as follows: Housa term Gain if the Halifax Index rises Loss if the Halifax Index falls 5 years 150% of rise 50% of loss 10 years 170% of rise 30% of loss Here are some examples of potential returns on 1,000 to demonstrate how the Growth Housas work:* 5 Year Growth Housa Index % change Growth Housa Return % Balance at Maturity +20% +30 1, % +15 1,150 0% 0 1,000-10% % Year Growth Housa Index % change Growth Housa Return % Balance at Maturity +20% +34 1, % +17 1,170 0% 0 1,000-10% % The average Halifax Index change over all 10 year periods since inception of the Index is +88%. The total return on a 1,000 Growth Housa investment in these circumstances would be 2,490. But please remember that past performance is not a reliable indicator of future performance. *The potential returns shown are not a reliable indicator of future performance. 5

7 What is the Protected Housa? The Protected Housa is designed to suit more conservative investors. Your capital is protected if the Halifax Index is lower at maturity than at investment but, if it rises, you share in 100% of the increase. This might be attractive for an investor who regards capital preservation as a priority. The Protected Housa is available for a 5 year term only. Capital protection only applies if you hold the investment to its maturity. Like the Growth Housa, gains on the Protected Housa are subject to Capital Gains Tax, unless you choose to hold it within an ISA or SIPP. Examples of potential returns on 1,000:* 5 Year Protected Housa Index % change Return at Maturity +20% 1, % 1,100 0% 1,000-10% 1,000-20% 1,000 The average Halifax Index change over all 5 year periods since inception of the Index is +40%. The total return on a 1,000 Protected Housa investment in these circumstances would be 1,400. But please remember that past performance is not a reliable indicator of future performance. What are the risks? Past performance is not a reliable indicator of future performance and the value of your investment can go down as well as up, so you could get back less than you originally invested. Of course, Protected Housa capital is preserved provided the investment is held for the full five year term. A Housa should be considered as a long term investment and you should not assume you have access to your investment prior to maturity. Prior to maturity, Castle Trust may agree to repurchase your Housa at a price reflecting the actual period of investment (with no redemption charge) provided that, at the time of your request to encash, the volume of Housa redemption requests received by Castle Trust does not materially exceed the volume of new Housa applications. In such circumstances, Castle Trust may not agree to repurchase your Housa. Any tax reliefs mentioned are those currently available and are subject to change. Your Housa investment is eligible for protection up to a maximum of 50,000 per investor by the Financial Services Compensation Scheme in the unlikely event that Castle Trust is unable to meet its financial obligations. *The potential returns shown are not a reliable indicator of future performance. 6

8 Castle Trust is the UK s leading equity loans and residential property investment provider, backed by J. C. Flowers & Co., one of the world s largest institutional investors specialising in financial services. This information is issued by Castle Trust Capital Management Limited which is authorised and regulated by the Financial Conduct Authority. Castle Trust Capital Management Limited is registered in England & Wales. Company number Registered office: 10 Norwich Street, London EC4 1BD. Designed and produced by The Icon Design Partnership Compliance approval 30 January 2014 (refi83)