You don't usually expect your estate agent to offer you a structured investment product. So when Knight Frank, the upmarket property specialist, announced that it was marketing one such product in conjunction with UK bank Abbey, the market took notice.
In September Abbey launched its Residential Property Plan (RPP) - a 10-year investment designed to provide both capital protection and exposure to the UK residential property market without the risks that come from buying property as an investment. The plan tracks the Halifax House Price Index (HHPI) and provides 200% of any growth in the index at maturity, subject to averaging, which means the upside will be calculated by comparing the level of the index on November 21, 2005 with the average of the 12 published monthly index levels preceding November 20, 2015.
The RPP had been in development for more than six months before launch, says Mike Brown, London-based head of retail business development for Abbey. The initial design was driven by feedback from pension-specialist independent financial advisers who were seeking alternatives to direct investment for pension scheme members to gain low-risk exposure to residential property. "At the same time, we were working with Knight Frank on the development of synthetic property investment concepts and found that their customer base had similar demands," Brown adds. "Knight Frank's expertise in the residential property market was invaluable in settling on final shape of the product. Working with Knight Frank has enabled us to play to our respective strengths - Abbey in structuring the product and Knight Frank in providing property market expertise."
Although many investors are aware of the benefits of including residential property in their portfolios, some are either deterred by the risks associated with direct investment or lack sufficient funds to invest directly in residential property, Brown notes, and so such a product should prove attractive.
The RPP can be invested in directly or through a mini/maxi stocks and shares Isa or Pep/Isa transfer. Trustees of self-invested personal pensions (Sipps) and small self-administered scheme (SSAS) arrangements can invest in the RPP, allowing them to gain exposure to the residential property market six months ahead of proposed changes to UK pension arrangements on so called A-day - April 6, 2006.
The plan is available until November 4 unless it is sold out before then. The minimum investment is £3,000 and the maximum is £500,000.
"The target audience for the RPP is firstly holders of Sipps looking for exposure to the residential property market ahead of A-day who may not have either sufficient funds to buy a single property or who want a balanced investment portfolio," Brown says. "Our secondary audience was parents or grandparents looking to help their children, or grandchildren, get onto the property ladder in the future. For these investors, the RPP offers a directly correlated investment. The RPP is unique in that it is available to members of Sipp and SSAS pension arrangements and can be held within an ISA or PEP or purchased as a direct investment."
Abbey has promoted the plan to IFAs and Knight Frank has led the press campaign, which has resulted in widespread coverage in the financial and trade press, Brown notes.
But Abbey's marketing initiatives are not confined to property-related investments. Earlier this year, for example, Abbey introduced for the first time a plan structured as an offshore investment company coupled with an Abbey guarantee, which sold well through its branch network. "The key differentiator was marketing the plan with an Abbey guarantee rather than capital protection via a number of different financial institutions," Brown says. "This sent a much simpler and more powerful message."
WHY ABBEY WON
Many Sipps holders will be looking to invest in property ahead of A-day, but they are probably best off doing so through a structured product. Abbey has picked up on the demand and marketed its product where investors go for their property needs - the estate agent.
The week on Risk.net, December 2–8, 2017Receive this by email