Helping fund managers seize opportunities in the property market

As lockdown restrictions continue to ease, we’ve seen a vibrant increase in activity as clients look to the future.

Knight Frank reports that the number of offers accepted in the prime London property market reached its highest level in a decade in April 2021 and this reflects our experience. Clients who had delayed their purchasing decisions are now taking action. And, of course, when they see an opportunity, they want to jump on it. 

At Investec we have a team of specialist private bankers which 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.”

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 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.