Helping fund managers seize opportunities in the property market

20 Jul 2020

Amanda Hallam

Private Banker

Now more than ever, clients need a banking partner who is not only accessible and highly responsive, but who understands their situation and can move quickly to react to opportunities in the property market.

Since the lifting of lockdown restrictions, we’ve seen an uptick in activity and a real shift in behaviour. Where clients were sitting on the fence in relation to their purchasing decisions, they now tend to have more urgency. and are seeing now as an attractive time to buy property. So, of course, if a client sees an opportunity, they want to jump on it.
 
At Investec we have a team of specialist private bankers who specifically works with clients in the Fund and Asset Management sectors and are therefore well versed in the nuances of their income profile. This experience enables us to move quickly when such opportunities present themselves. “Being empowered to make decisions means we can work at speed when it comes to process and documentation. This is key in providing a responsive service, as is understanding the client’s lifestyle” explains private banker Carlos Mendes. “A funds focused banker is able to quickly get to the crux of a client’s requirements and help them seize opportunities in the current market.”
Amanda Hallam Private Banker

Since the lifting of lockdown restrictions, we’ve seen an uptick in activity and a real shift in behaviour. Where clients were sitting on the fence in relation to their purchasing decisions, they now tend to have more urgency.

Amanda Hallam, Private Banker

Speak to a Private Banker about your needs

How do we work with a fund manager’s complex income?

We understand there are a number of complexities when it comes to the breakdown of a fund manager’s income. Mainstream mortgage lenders may only consider a modest percentage of a performance or discretionary-based bonus or profit share when assessing affordability and some will cap the bonus figure to a maximum multiple of salary. 
 
Career moves and changes can present particular challenges. Private banker Daniel Swift comments: “If a client is relatively new to a firm, or is in the early stages of launch or start-up, they might experience limitations around affordability as mortgage lenders will typically only consider additional income over and above basic salary, with a minimum track record of two or three years. Our team of specialist bankers understands such nuances and can work with our credit team to look at their long-term career trajectory as well as previous track record.”
 
A further challenge is presented when it comes to when and how the bonus income is paid. The vast majority of our clients’ bonuses are subject to deferral, so the percentage of bonus that’s deferred, the period of deferral, payment dates and asset class all need to be considered. Not all lenders are able to consider this and some will rely only on previously received income. As well as considering deferred income, we also take a holistic view of a client's balance sheet and, for high net worth clients, will consider their ability to draw on assets to support the ongoing servicing of a mortgage.
Carlos Mendes Private Banker

We speak to fund managers all day, every day, building long-term relationships with our clients and getting a clear understanding of any future liquidity events. If a client is expecting the vesting of a deferred bonus, we can assess the risk profile of any underlying fund or stock where it’s held and tailor a lending solution and future repayment schedule accordingly.

Carlos Mendes, Private Banker

Carlos adds “We speak to fund managers all day, every day, building long-term relationships with our clients and getting a clear understanding of any future liquidity events. For example, if a client is expecting the vesting of a deferred bonus, we can assess the risk profile of any underlying fund or stock where it’s held and tailor a lending solution and future repayment schedule accordingly.”
 
Our mortgage repayment terms are designed around a client’s income in line with any such liquidity events. Dan adds: “We endeavour to be flexible, so clients’ access to capital can flex as their career does, enabling them to make overpayments and pay down or accelerate those payments depending on the agreed rate type. We’re also able to offer an interest only or revolving credit facility where appropriate.”
 
We also have a team of specialist FX dealers so if a client presents with foreign currency income, we’re equipped to take that on board as well. 
Daniel Swift Private Banker

Our team of specialist bankers understands the nuances of being new to a firm, or in the early stages of starting up, and can work with our credit team to look at their long-term career trajectory as well as previous their track record.

Daniel Swift, Private Banker

How Investec looks beyond the security

Working with clients to expand property portfolios

We recently helped a fund manager client who was looking to raise capital to acquire an investment property to add to their already successful buy-to-let (BTL) property portfolio.

Helping clients secure their dream home

As well as helping clients build investment portfolios, we’re also working with them to secure their dream homes. 

Working with clients to expand property portfolios

We recently helped a fund manager client who was looking to raise capital to acquire an investment property to add to their already successful buy-to-let (BTL) property portfolio. The client had a mixture of liquid and non-liquid assets, including deferred bonuses, pensions, stocks and a property portfolio held within a Special Purpose Vehicle (SPV). 

By considering the combined rental income of the BTL portfolio and taking an existing asset in London as security, we were able to provide a solution that enabled the client to complete the purchase. We offered the client an interest-only facility, with repayment on the sale of investment properties by the end of the mortgage term.

Helping clients secure their dream home

As well as helping clients build investment portfolios, we’re also working with them to secure their dream homes. We recently worked with the owner of a long/short equity focused hedge fund – a client who already held transactional banking products with us – who needed help securing a mortgage on a primary residence, after a previous purchase had fallen through.  

As with the previous client, they had a mixture of liquid and non-liquid assets, and an income paid via a non-standard structure, receiving profit distributions every two years. Again, working closely with our credit team, we were able to look at the client’s entire situation, taking into account future liquidity events as well as the track record of their fund. This in depth understanding of the client’s income profile allowed us to structure the mortgage on a five-year fixed rate interest-only basis, followed by 20 years amortisation.  

Speak to a Private Banker about your needs