Connect with us

Business

Phuket Finance: Beat inflation with a low-risk return

Legacy Phuket Gazette

Published

 on 

PHUKET: One fund that I have recently been putting into portfolios is the Freehold Income Trust (FIT), which invests in ground rents. Ground rents are a relic of feudal Britain, which can now be bought and sold like any other asset.

They are extremely safe income-yielding alternative investments, since the holder of ground rent could theoretically repossess a property worth much more than the ground rent itself, if the payments were not made.

Ground rents are such a safe haven because generally they are extremely over-collateralized. For example, a flat worth 200,000 Pound Sterling may be required to pay a ground rent of 100 Pound Sterling per year. Obviously they are not going to risk losing their flat by not paying such a trivial amount.

The bulk of the ground rents held in the fund have periodic inflation-based uplifts in yield, which protect this fund from the interest rate risk that most fixed income type of investments are vulnerable to in today’s low rate environment. Many fixed interest investments, especially bond funds, stand to lose a lot of principal when interests eventually do rise. Thus, I am always looking for alternatives and this fund does a very good job of balancing risks.

It isn’t the type of fund which is going to excite you as it only returns about 6% with yields as low as they are now, but there are many reasons why this should be included in a portfolio.

The first is that it can provide a steady return and has very low volatility. A second reason is that it provides diversification into another asset class, which is not correlated to other traditional asset classes such as stocks and bonds. There can also be capital gains on the ground rents themselves, although typically not large, and of course there could theoretically be a loss as well, however unlikely.

The FIT fund has been running for 19 years and has a very consistent track record, delivering positive inflation beating returns every year.

It was originally started by the bank Close Brothers and was recently sold off. It is now run by Alpha Real Capital.

I was originally hesitant to recommend ground rent funds because I couldn’t quite get my head around their valuation formulas, and thought there might be some risks I wasn’t seeing. One of the major risks I do see with a fund such as this: if investors were to make a run (withdraw their money simultaneously), the secondary market for ground rents might not be liquid enough to meet the stated liquidity terms of the fund.

The fund is available for very low minimum investment levels and is available on the platforms of most offshore providers. I believe for as little as one thousand Pounds Sterling, through an offshore bond, or five thousand Pound Sterling as a direct investment, you can gain exposure to this very safe alternative asset class. If you are looking for a safe income stream that is better than what the banks are paying in interest, this fund may just be able to help you out a bit.

David Mayes MBA lives in Phuket and provides wealth management services to expats around the globe, focusing on UK pension transfers.

He also runs Humble Asset Management, a British Virgin Islands-based alternative investment fund. He can be reached at david.m@faramond.com or 085-335-8573.

— David Mayes

 

Get more from The Thaiger

📱 Download our app on Android or iOS
👋 Have your say on our Thailand forums
🔔 Subscribe to our daily email newsletter
📺 Subscribe / Join YouTube for daily shows
👍 Like/Follow us on Facebook
🐦 FOLLOW us on Twitter
📷 FOLLOW us on Instagram

image

Join the conversation and have your say on Thailand news published on The Thaiger.

Thaiger Talk is our new Thaiger Community where you can join the discussion on everything happening in Thailand right now.

Please note that articles are not posted to the forum instantly and can take up to 20 min before being visible. Click for more information and the Thaiger Talk Guidelines.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Follow Thaiger by email:

Indonesia6 hours ago

Man with Covid-19 disguised as his wife to board flight

Hua Hin7 hours ago

Kitchen raiding elephant breaks same wall in house for more food

Thailand8 hours ago

1st Taekwondo Olympic gold as Panipak wins for Thailand

Welcome back to Thailand!

Thaiger is getting behind local businesses for the restart of tourism in Thailand - up to 50% discounts across all advertising packages!

Coronavirus (Covid-19)9 hours ago

AstraZeneca Thailand writes open letter to people of Thailand

Koh Samui13 hours ago

Surat Thani announces new Covid-19 measures for Samui Plus

Thailand16 hours ago

His Majesty the King donates 2.8 billion baht in Covid-19 aid

image
Join the conversation on the Thaiger Talk forums today!
Coronavirus (Covid-19)17 hours ago

Covid UPDATE Provinces: 14,260 new infections, 119 deaths

Coronavirus (Covid-19)17 hours ago

Vaccination registration open for foreign residents over 60 in Bangkok

Coronavirus (Covid-19)19 hours ago

Autopsy results for woman who died after mixing vaccines

Coronavirus (Covid-19)24 hours ago

Covid UPDATE Saturday: 14,260 new infections, news briefs

Thailand1 day ago

Department head predicts Covid-19 could last up to another year

World1 day ago

Swedish prison hostage situation resolved with pizza

Thailand1 day ago

Minister: Foreigners, migrant workers are cared for amid Covid-19

Coronavirus (Covid-19)1 day ago

“Withhold Intubation” for certain older Thammasat Hospital patients

Coronavirus (Covid-19)2 days ago

Bang Sue vaccination centre open for expats 60+, under must wait

Thailand5 months ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism5 months ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket5 months ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism5 months ago

Phuket Thai food treats you need to try | VIDEO

Thailand5 months ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism5 months ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand6 months ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand6 months ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand6 months ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand6 months ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand6 months ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand6 months ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand6 months ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand6 months ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11

Thailand7 months ago

Thailand News Today | Southern floods, Face mask fines, Thai Air Asia woes | January 8

Trending