BR report 2018

22 “There are now nearly 770,000 UK residential properties worth £1m or more.” NUMBER OF MILLION POUND PROPERTIES BY REGION SCOTLAND 11,101 NORTH WEST 12,552 WALES 12,219 WEST MIDLANDS 12,219 NORTH EAST 4,835 YORKSHIRE & HUMBER 4,103 EAST MIDLANDS 6,845 EAST OF ENGLAND 69,840 SOUTH WEST 33,717 SOUTH EAST 180,397 LONDON 430,720 1. GUILDFORD 5,889 2. CAMBRIDGE 5,530 3. READING 5,421 4. SEVENOAKS 5,416 5. OXFORD 5,242 6. ST ALBANS 4,981 7. BRISTOL 4,792 8. EDINBURGH 4,759 9. LEATHERHEAD 4,707 10. TWICKENHAM 4,596 TOWNS WITH THE HIGHEST NUMBER OF MILLION POUND PROPERTIES SOURCE: ZOOPLA At this point, there can only be speculation over whether the introduction of the RNRB will have a material effect on BR. HMRC data for BR receipts typically lags by two years, so we will have to wait until 2019 to have some tangible figures. However, as previously mentioned, knowledge of BR’s existence is particularly thin. Even if there is an initial dip in demand due to the RNRB, it’s likely to bounce back quickly as there is certainly a large captive market of estates with excess wealth beyond the allowance of the new RNRB. SECTOR ANALYSIS STATISTICAL ANALYSIS OF 2018 OPEN BR OFFERS BY INVESTMENT TYPE Alternative Investment Funds (AIF) account for 8% of open BR funds in 2018. This is a reduction from 10% in the previous year. Only five open BR offers incorporate an AIF structure. BR offers with a Discretionary Portfolio Service structure account for the vast majority of propositions, where an investment manager makes investment decisions on behalf of their clients. The proportion of 84% has not changed from last year. BY INVESTMENT STRATEGY The Capital Preservation & Growth strategy leads the market at 32.3% of open BR offers. However, this is down from 35% in 2017. Offers that include an element of capital preservation account for 45.2% of the market. This is down from 50% in 2017. Almost nine in every ten BR offers now has growth within its investment strategy. BY INVESTEE COMPANY TYPE BR offers that are AIM listed account for 46.8% of the market and this figure has remained quite stable over the last year. 47.5% of the market is now asset backed, a significant rise from 20% in 2017. The reason for this steep increase is largely due to the changes in the way that MICAP collects its data. ALTERNATIVE INVESMTENT FUND DISCRETIONARY PORTFOLIO SERVICE SINGLE COMPANY CAPITAL PRESERVATION & INCOME CAPITAL PRESERVATION & GROWTH GROWTH LATER STAGE AIM LISTED ASSET BACKED 8% 8% 84% There were 62 open BR offers as of March 2018. The data has been provided by the MICAP platform. 12.9% 24.2% 32.3% 30.6% GROWTH & INCOME 50.8% 47.5% 1.7% 23 BR FEES CAN BE OPAQUE Readers should note that fees and charges can be opaque among BR offers. Although we have highlighted a broad range of the fees that are present in the industry, some can go under the radar. On this basis, it can be difficult to compare BR offers on a like for like basis, and it may not be immediately obvious what all the relevant fees are. Once all fees are consolidated, this can sometimes result in higher overall charges. Irrespective of whether the investor or investee company takes on this burden, it can push up the risk profile of BR investments. If fees are high, it can mean that less of the capital invested reaches the underlying companies, or that a portion of the funds received by the underlying companies is used to pay fees rather than to generate growth and income. This presents an obvious challenge to meeting target returns and may lead to greater risks being taken to achieve them. Advisers should be doing careful due diligence to make sure they are aware of all the fees of a particular BR offer when recommending to a client.