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Downing Property Finance supports Carmichael Homes with £11.6m funding for sustainable Scottish developments
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Downing launches new actively managed liquid alternatives fund aiming to deliver 7% to 10%+ per annum and positive returns in most markets. The new MGTS Downing Active Defined Return Assets Fund (‘Active Defined Returns’, the ‘Fund’), is the first fund from its new Liquid Alternatives team.
The Fund is aimed at institutional investors, Discretionary Fund Managers, IFAs and advised sophisticated individual investors, and will primarily consist of UK Government bonds and large-cap equity index options, which provide significant scalability and strong liquidity. It aims to deliver 7% to 10%+ per annum and positive returns in all markets except for a sustained equity market fall (generally more than 35%), over a period of at least six years.
The Fund is the first to be launched by the new Liquid Alternatives Team established by Downing. Collectively, the team has over 125 years of experience and sector knowledge, and includes Tony Stenning, who held senior roles at BlackRock and most recently was CEO of Atlantic House Group; Russell Catley, founder and also a former CEO of Atlantic House Group; Huw Price, a former Executive Director at Santander Asset Management, and Paul Adams, former Head of Cash Equities and Derivatives Sales, Royal Bank of Canada.
The Fund offers investors a compelling building block for multi-asset portfolios, aiming to add consistent and predictable returns, typically secured with a portfolio of UK Government bonds. The unique proposition includes a hybrid approach of using systematic derivative strategies and active management, combining liquid investments with predictable returns, and an equity like risk profile.
Investment strategy: Maximising the probability of delivering predictable defined returns across the economic cycle.
Systematic Liquid Derivatives: Systematic, derivative strategies optimise the equity risk-return profile. The Fund uses rules-based derivative strategies linked to the most liquid, large-cap global equity indices (i.e. FTSE100, S&P500) with the aim of harvesting well-proven consistent returns across a wide corridor of market conditions.
Strong security: The Fund will hold a high-quality portfolio of assets as secure collateral – typically UK Government bonds.
Active benefits: At times, rules-based, passive derivative strategies can underperform when markets move strongly – this is when specialist active management can add incremental gains by monitoring and monetising positions and applying active risk management.
Key benefits
Increased consistency and predictability of returns: Positive returns in all markets except for a sustained equity market fall of more than 35% over at least six years.
Diversification of risk: The Fund’s risk components are diversified across large, liquid equity indices, observation levels and counterparties. Secured with high-quality assets – typically UK Government bonds.
Active management: Our experienced team will actively manage the Fund and its investments to optimise risk and reward for investors.
Russell Catley, Head of Retail, Liquid Alternatives at Downing, said: “Put simply, we focus your investment risk on the probability of receiving the returns you need, not those you don’t. We target the highest probability of delivering 7% to 10%+ per annum with active management adding material incremental gains. We believe that we are building the next evolution of the proven success of Defined Returns funds
The Downing team isseeing strong demand from clients looking for alternatives to large-cap equity funds which are becoming concentrated in technology stocks, or alternatives to UK equity income funds and illiquid alternatives.”
Tony Stenning, Head of Liquid Alternatives at Downing, said: “The launch of our Active Defined Return Assets Fund is a significant milestone in the ambitious build-out of our new Liquid Alternatives strategies. It is a solution-focused fund that should deliver stable high single or low double-digit returns across a wide spectrum of equity market conditions, except for a persistent multi-year bear market. The Fund is designed to enhance balanced portfolios by providing consistent, predictable returns and is suitable for accumulation or drawdown.
“We aim to deliver a unique combination of proven systematic derivative strategies and specialist active management, and we are doing so at a very compelling fee level, below our closest competitors and in line with active ETFs.”
How the Fund is expected to perform in different markets
In bullish markets: UK Government bonds secure the capital, and the equity index options deliver a predictable 7-10%+ return per annum – giving up some less likely upside.
In neutral markets and normal market corrections: UK Government bonds secure the capital, and the index options deliver a predictable 7-10%+ return per annum.
In a sustained sell-off: if markets fall more than the cover to capital loss and do not recover for six years. Then capital is eroded 1:1 in line with the worst performing index.
The average Cover to Capital Loss is targeted at 35%: the average cover to capital loss represents the average level the Global indices within the Fund could fall before capital is at risk.
Fund key risks
Performance: Capital is at risk. Investors may not get back the full amount invested.
Liquidity: Access to capital is always subject to liquidity.
Counterparty risk: Other parties could default on the contractual obligations.
Fund Structure
UK regulated OEIC fund structure, fully UCITS compliant
Daily dealing, at published NAV
Minimum investment: £100,000
SRRI: 6 out of 7
Depositary: Bank of New York
Authorised corporate Director (‘ACD’): Margetts Fund Management Ltd.
I share-class: SEDOL: BM8J604 / ISIN: GB00BM8J6044
F share-class: SEDOL: BM8J615 / ISIN: GB00BM8J6150
Risk warning: Opinions expressed represent the views of the fund manager at the time of publication, are subject to change, and should not be interpreted as investment advice. Please refer to the latest full Prospectus and KIID before investing; your attention is drawn to the risk, fees and taxation factors contained therein. Please note that past performance is not a reliable indicator of future results. Capital is at risk. Investments and the income derived from them can fall as well as rise and investors may not get back the full amount invested. Investments in this fund should be held for the long term.
Important notice: This document is intended for professional investors and has been approved as a financial promotion in line with Section 21 of the FSMA by Downing LLP (“Downing”). This document is for information only and does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities and no reliance should be placed on it. Downing does not offer investment or tax advice or make recommendations regarding investments. Downing is a trading name of Downing LLP. Downing LLP is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 545025). Registered in England and Wales (No. OC341575). Registered Office: 10 Lower Thames Street, London EC3R 6AF.
Glasgow’s innovative developer, Carmichael Homes, has secured a significant funding package from Downing Property Finance, bolstering the expansion of its sustainable property developments across Scotland.
Through Downing’s sustainable lending framework, Downing Property Finance has provided essential financing for two major projects, with combined funding of £11.6 million, demonstrating dedication to environmentally conscious funding.
Downing Property Finance’s loan product is designed to align with the borrower's environmental aspirations. Borrowers are incentivised to implement more sustainable features which promote attributes such as water management, carbon reduction, and biodiversity enhancement. Developments meeting the criteria qualify for an interest rebate of up to 1%.
"The Fieldings" set in the sought-after locale of Jackton, East Kilbride, is a development of 19 modern townhouses engineered for sustainability without compromising luxury. These homes are remarkable for their green construction and boast state-of-the-art energy-efficient features, proximity to local amenities, and access to open green spaces.
"The Fieldings" set in Jackton, East Kilbride, Glasgow
The subsequent partnership in Roslynlee will deliver 26 unique four-bedroom energy efficient homes, each designed with sustainability at its core. This will enhance housing diversity on brownfield land. These homes will offer residents unparalleled views of the surrounding countryside, seamlessly integrating modern living with the tranquillity of nature.
Carmichael Homes, rooted in Glasgow and with over thirty years of industry presence, has consistently delivered diverse housing projects throughout Scotland. Known for creating energy-efficient homes that adhere to high standards, the developer has carved a niche in regenerating compact sites. Its commitment to greener, more sustainable building methods and net-zero technologies sets it apart in the quest for greener living spaces.
The deal was led by Relationship Director John Pollington on behalf of Downing Property Finance’s team, with support from Mark Sukhram.
Scott Carmichael, Managing Director of Carmichael Homes said: “Our collaboration with Downing Property Finance has been instrumental in bringing our vision to life. Their tailored Sustainability-Linked Loan has enabled us to pursue this project with greater financial agility and underscores our shared values in championing sustainability in the housing sector.”
John Pollington, Investment Director at Downing Property Finance, added, “The expertise and dedication Carmichael Homes has brought to these projects are exemplary. Both developments are a testament to their commitment to providing diverse and sustainable family housing within the stunning Scottish landscape. Carmichael's skilled team's efficient advancement of these projects has cemented our strong partnership. Their remarkable sustainability credentials resonate strongly with Downing's sustainability lending scheme, playing a pivotal role in the fruition of these developments."
The collaboration with Carmichael Homes, a leading advocate for green building practices in Scotland, exemplifies Downing Property Finance's support for sustainable property finance solutions.
Downing Property Finance
Downing Property Finance typically lends between £2 million and £30 million to experienced developers with the ability to go higher by exception. It lends up to 90% loan-to-cost and 70% loan-to-gross-development value.
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