The recent UK budget is excellent news for the student accommodation market. The government has announced the allocation of an extra £250 million, to create an additional 20,000 university places for students. With the need for quality accommodation already exceeding the supply, this news will increase demand for the existing space. As supply/demand ratios are a major factor in driving prices, this is good news for investors in the student accommodation sector.
Brandeaux was a pioneer in providing private student accommodation in the late 1990s, and is now one of the largest investors in the sector. The UK-based Fund has a portfolio across with more than 15,000 beds, in residences located in 18 major university towns and cities. Incredibly, the Sterling Fund which was launched on the 15 June 2000 has never posted a losing month, and has achieved an average growth of 9.7% p.a. since inception.
The fund objectives are to deliver consistent annualised positive returns of 8% to 10% over a rolling three to five year period while maintaining a profile of low volatility performance.
Brandeaux’s student accommodation portfolio of residences is already over 82% booked for the coming 2010/2011 university year beginning late September, so it is well on track to maintain 100% occupancy. With net rental increases for 2010/2011 up nearly 8% over 2009/2010 prices, Brandeaux Student Accommodation Fund (£) looks set for another year of top-of-target performance.
The US$ denominated Brandeaux Student Accommodation Fund which invests solely in Brandeaux Student Accommodation Fund (£), has a currency hedge to mitigate the effect of exchange rate fluctuations between US$ and Sterling.
Another way of entering the Student Accommodation market is to spread your investment over a wider region, so as to reduce any volatility or risk. The Coral Student Accommodation Fund offers investors the opportunity to participate in the growing sector of student accommodation by investing not in the buildings themselves, but in the companies that own and manage the properties. This approach is known as a ‘Fund of Funds’.
As such, the Coral Student Accommodation Fund invests in established UK schemes and providers, while also benefiting from the enormous opportunities, emerging in Western Europe. By spreading exposure to several established specialist providers, the fund aims to maximise returns, and minimise dependency on one single fund or provider.
The fund was launched in March 2009 and has attracted a lot of investment during its opening year. Returns have ranged from 8% in the Euro fund, 9% in the dollar fund and 10% in the sterling fund. This is right on the target of 8-10% p.a.
With security for our money on everyone’s mind, it’s important to know where a fund is based and how it’s regulated. The Coral Student Accommodation Fund is based in Luxemburg. Luxemburg offers investors the security and knowledge that the fund is highly regulated, and is monitored. The custodian for the Fund (where the money is held) is Deutsche Bank Luxembourg: again regulated.
In conclusion, for those investors looking to access a non-traditional package, investment in the Student Accommodation sector looks very inviting. The sector is non-correlated to the traditional stocks and bonds market that has seen so much volatility in the past few years, which means that while the rest of the market might be a cause for concern, this sector would seem to have a bright and steady future ahead.
George Lindsay, Wealth Manager at Expat Solutions
This post was written by HKT Homes on April 12, 2010