Frequently Asked Questions

In the past, most charities’ investment portfolios have consisted mainly of equities and bonds, but in today's volatile economic environment it has never been more important for charities to hold a diversified portfolio of investments. It can help add an extra element of diversification and stability to investment portfolios for several reasons.

Firstly, commercial property has historically been a less volatile investment than equities or bonds, providing a relatively high level of income per annum. This is largely attributable to the fact that over the long term up to 80 per cent of the total return (income and capital) has been derived from rental income.

The income is also relatively predictable and even in times of economic uncertainty when companies may issue profit warnings and suspend dividend payments they should still be paying their rent, which tends to be a prior charge payable quarterly in advance. Likewise, if a company did enter administration, you still own the building as property represents a tangible, real asset.

Instead of being restricted to buying and selling, investors can improve returns through active management of their investments. This can include, for example, refurbishment and extension of a property or a change of planning use to a higher-value use. It might also include taking a surrender of a unit in a multi-let property to secure a new letting at a higher rent, thus creating rent review evidence for the other units.

Property is a capital-intensive asset requiring critical mass to maximise returns and minimise risk – we estimate that the minimum size of property portfolio to achieve these objectives is some £30 million.

Hence, for the majority of charities, which are unable to run their own segregated portfolios of such size, investment through pooled vehicles is perceived to offer many advantages:

• Property diversification – by pooling their interests, charities can participate in much larger portfolios, which provide the required diversification by type and geographical spread.
• Asset diversification – by holding units rather than large, lumpy individual buildings, charities can reduce their exposure to the sector and so lower their risk position.
• Lot size – a larger pooled portfolio can acquire larger buildings than charities acting on their own. This can improve overall performance as large properties tend to outperform smaller ones.
• Management time – property investment is a management-intensive, specialist field. Investment through pooled schemes reduces this burden for trustees while giving access to specialist property managers.
• Stamp duty – charities are exempt from the stamp duty land tax (approx. 5%) normally applied to property investments over £500,000. By acting collectively in a special charity vehicle, they gain a performance advantage.

The few charities large enough to run their own property portfolios can realise all the benefits outlined above for themselves. For the majority, however, it is only through a pooled approach that they can gain similar rewards from property investment.

Common Investment Funds are open-ended investment vehicles, similar to unit trusts, but are designed specifically for charities and established under Section 23 of the Charities Act 1993. Common Investment Funds are themselves charities with schemes approved and regulated by the Charity Commission.

Charity investors have a significant advantage over all other investors in property thanks to their exemption from stamp duty land tax (approx. 5 per cent on all transactions over £500,000). However, most charities do not have sufficient funds to create a portfolio large enough to spread the risk of owning individual properties.

A Common Investment Fund is one of the only indirect property investment vehicles that allow charities to take advantage of this exemption and achieve better returns on their investments. As a registered charity, a Common Investment Fund is itself exempt from stamp duty. Unlike property unit trusts, there is also no requirement to hold a fixed percentage of the fund in cash or readily realisable securities.

In addition, Common Investment Funds can avoid many of the problems associated with other types of indirect property investment. Some funds, for instance, have complex structures and high charges that are not always transparent to investors and may only become apparent during or at the end of the fund’s life, when returns fall short of expectations.

Finally, charities can take confidence in the fact that Common Investment Funds are regulated and approved by the Charity Commission and are transparent, providing regular reports and accounts so that investors can easily monitor performance.

The Fund aims to provide an attractive level of income, with the prospect of income and capital growth over the long term, by investing in a diversified UK commercial property portfolio.

The Fund invests across the four principal UK commercial property sectors: office (both London and regional), retail (high street, supermarkets and retail warehouses), industrial (manufacturing and distribution) and alternatives (leisure, hotels, roadside and car showrooms). It does not invest in speculative developments.

Only charities in England, Northern Ireland, Scotland and Wales are eligible to invest in a Common Investment Fund.

To enable as many charities as possible to invest in the Fund, the minimum investment is £25,000. Once you are a unitholder, you can top up your investment with smaller amounts.

To purchase units, please complete an application form and either email it to [email protected] or post it to CPF Client Services, Alter Domus (UK) Limited, 30 St Mary Axe 10th floor, London, EC3A 8BF, United Kingdom.

For further information, including how to make payment or request an application form, please go to the Reports and Documents page of this website.

The Fund is valued quarterly: on 24 March, June, September and December. A valid dealing instruction must be received on or before 5.00 pm on the 15th of the month in which the Valuation Day falls (or, if that is not a Business Day, the preceding Business Day) for dealing on the next Dealing Date.

We also find it helpful to be notified of any intended investment in the Fund as early as possible, as this helps us reduce the time it takes to place money into the property market.

To redeem units, please complete a redemption form and either email it to [email protected] or post it to CPF Client Services, Alter Domus (UK) Limited, 30 St Mary Axe 10th floor, London, EC3A 8BF, United Kingdom on or before 5.00 pm on the 15th of the month in which the Valuation Day falls (or, if that is not a Business Day, the preceding Business Day) for dealing on the next Dealing Date.

You can download redemption form from the Reports and Documents page of this website.

To increase liquidity, we have also created a secondary market to match sellers with buyers. To protect unitholders, clearly defined procedures for any necessary delay in redemptions are set out in the Scheme Particulars.

From the outset, we wanted to help charities that owned only a few direct investment properties to access a more diversified and balanced portfolio, reducing the costs of managing their assets by allowing them to transfer properties into The Charities Property Fund.

For charities with larger portfolios, an in specie transfer can also be a cost-effective way of investing in the Fund, often allowing them to avoid paying a sale fee. However, it has always been paramount to protect the interests of existing unitholders and to decline properties that do not fit the Fund's investment strategy.

Although the Fund has been offered more than 100 properties, only 27 have been accepted for in specie transfer. Some investors have also made use of our offer to sell their property investments for a discounted fee of 0.75 per cent, provided that the proceeds are invested in the Fund.

To ensure that investors benefit from economies of scale, most fees are on a sliding scale so that, as the Fund grows, the total cost of management continues to fall. The Manager’s fees and the Investment Adviser’s fees are combined into one management charge. This periodic management charge shall accrue on a quarterly basis and will be calculated by reference to the Net Asset Value of the Fund on each Valuation Date. It will be deducted and paid at the end of each quarter out of the Fund's assets.

The fees (excluding value added tax) will be based on the following annual rates:

• £0 to £100 million – 0.70%
• £100 to £500 million – 0.525%
• Above £500 million – 0.45%

The income is paid gross on a quarterly basis, six weeks after each valuation point (15 February, 15 May, 15 August and 15 November). For new investors, the first payment is made in the quarter following investment – roughly four and a half months after they join the fund.

The Fund is priced quarterly at the end of March, June, September and December. The full unit price and distribution history are available on this website or by downloading the latest factsheet.

The current unit price and historical yield are also published daily in the Financial Times. The Fund also appears in the WM quarterly Common Investment Fund Survey, with details published regularly in Charity Finance magazine.

Each year, all investors receive both an interim report and annual report. We also provide a quarterly factsheet and occasional newsletters or articles on a range of property-market topics. Copies are available in the News section of this website.

In addition, we hold an annual meeting for unitholders where we present on the Fund and our outlook for the property market.

As it is not the Fund's role to determine how much of an investor’s portfolio should be held in cash or property, our intention is to remain as fully invested as possible. In practice, however, some cash will be held on deposit for liquidity purposes and because investments rarely match the exact lot size needed to use all available funds.

As all unitholders are charities and the Fund’s main aim is to maximise income, we do not believe that it is appropriate for the Fund to undertake speculative development.

However, we have taken advantage of our ability to engage in forward commitments on several occasions, entering into contracts with developers to purchase properties at an agreed price once construction is complete and a tenant has taken occupation.

As the Fund is designed specifically for charities, we do not believe it appropriate to increase their risk through gearing – the process by which funds borrow money to boost the amount they can invest. In some property funds, gearing can amount to as much as 50% of the fund’s value, but while this can enhance gains in a rising market, it can also magnify losses if returns fall.

If we know that substantial funds are due to be invested at the end of a quarter and a suitable investment opportunity arises that is time-critical, the Fund has the ability to take a short-term bridging loan.

Returns from property-company shares tend to move more in line with equity markets and therefore do not provide the diversification benefits of direct property ownership. Their income yields are also materially lower, so to avoid diluting the Fund's income profile, the Fund does not invest in property-company shares.

Most charities already have exposure to these companies through their traditional equity investment portfolios.

As a Common Investment Fund, the Fund is not permitted to adopt a specific ethical investment policy, as it would be too difficult to represent the views of all investors equally.

However, we remain sensitive to the need to maximise returns while avoiding investment in properties whose tenants could cause embarrassment to our unitholders. These would include companies whose primary business is the production or sale of tobacco, arms or pornography, or those involved in cosmetic or non-essential animal testing.

When the Fund was launched, an Advisory Committee was established to provide an ongoing review of its structure and performance, taking into account the property-market outlook and any special factors affecting the Fund.

The Committee meets quarterly, and all members represent charities that are unitholders in the Fund.

The current Committee comprises:

• Andrew Brown
• Chris Hills
• Rory Landman
• Brenna O’Roarty
• Alan Fletcher
• John Wythe (Chair)
• Birgitta Bostrom
• Howard Meaney
• Keith Wade

Advisory Committee biographies

Committee members are happy to speak with any charity considering an investment in the Fund. Contact details are available on request.

There is no doubt that as an investment, property is less liquid than cash, equities or bonds. However, for most charities, property will form only a small part of their overall portfolio. Liquidity should therefore be assessed across the whole portfolio rather than in isolation.

Concerns about liquidity, the costs involved in managing direct property, and the scale needed to create a diversified portfolio have been key factors behind the growth of indirect investment vehicles, including Common Investment Funds. This has opened up property investment to many more investors and, as a result, liquidity in the marketplace has improved.