Due Diligence Information

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Due Diligence Information Due Diligence Information January 2020 For Professional Clients and Intermediaries. Not to be provided to Retail Investors. www.homeinvestor.fund Contents 1 Executive Summary ................................................................................................................................................ 3 2 Key Facts ................................................................................................................................................................ 4 3 Fundamental differences: Residential v. commercial ............................................................................................. 5 3.1 Liquidity ........................................................................................................................................................... 5 3.2 Valuation ......................................................................................................................................................... 5 3.3 Tenancy Agreements ...................................................................................................................................... 5 3.4 Stamp Duty Land Tax (SDLT) ........................................................................................................................ 6 3.5 Benchmarks .................................................................................................................................................... 6 3.6 Performance ................................................................................................................................................... 8 4 Fund Structure and roles of key parties .................................................................................................................. 8 5 What is a Property Authorised Investment Fund (PAIF)? ....................................................................................... 9 6 Investment Objective and Performance Benchmarking ......................................................................................... 9 6.1 The Investment Objective and Policy ............................................................................................................. 9 6.2 Fund Performance Comparator .................................................................................................................... 10 6.3 Assessing Investment Performance ............................................................................................................. 11 7 Investment Philosophy .......................................................................................................................................... 11 7.1 Background ................................................................................................................................................... 11 7.2 Key Principles ............................................................................................................................................... 11 8 Investment Process .............................................................................................................................................. 12 8.1 The Investment Plan ..................................................................................................................................... 12 i. Top down ...................................................................................................................................................... 13 ii. Bottom up ...................................................................................................................................................... 13 8.2 Property Selection and Acquisition ............................................................................................................... 13 8.3 Portfolio Construction and Management ...................................................................................................... 15 8.4 Property management .................................................................................................................................. 18 8.5 Sales of Properties........................................................................................................................................ 19 9 Environmental, social and corporate governance ................................................................................................ 19 9.1 Environmental ............................................................................................................................................... 19 9.2 Social ............................................................................................................................................................ 20 9.3 Governance .................................................................................................................................................. 21 10 Product appropriateness ................................................................................................................................... 22 11 Fund Charges ................................................................................................................................................... 22 12 Appendices ....................................................................................................................................................... 24 12.1 Hearthstone Investments Plc ........................................................................................................................ 24 12.1.1 Group Fund Range ................................................................................................................................... 24 12.2 Board Members, Hearthstone Group companies ......................................................................................... 25 Investment Team ...................................................................................................................................................... 27 12.2.1 Thesis Asset Management Limited ........................................................................................................... 28 1 12.2.2 Investment Committee .............................................................................................................................. 28 12.3 Property Manager ......................................................................................................................................... 28 12.4 Share class summary and platform availability ............................................................................................ 30 12.5 Fund Performance ........................................................................................................................................ 31 12.5.1 Risk v Return ............................................................................................................................................ 31 12.5.2 Correlation Tables ..................................................................................................................................... 33 13 Operating Model of the PAIF & Feeder Fund ................................................................................................... 37 14 External research resources ............................................................................................................................. 38 14.1 Organisation .................................................................................................................................................. 38 14.2 Description .................................................................................................................................................... 38 14.3 Research page and items of specific interest ............................................................................................... 38 Due Diligence Information This document is provided to assist in the understanding of the Fund by research agencies, intermediaries, advisory firms and other professional clients. It should not be regarded as a substitute for the Fund Prospectus, a copy of which is separately available. You should be aware that the information in this document is subject to change and is correct as at the date of this publication – January 2020. Updated information is available at any time by contacting the Hearthstone team. 2 1 Executive Summary The TM home investor fund (the Fund) is the UK’s first Financial Conduct Authority regulated residential Property Authorised Investment Fund (PAIF) available for private client and retail investors. We believe the long-term economic drivers impacting UK residential property investing are compelling. On one hand, there is a structural undersupply of good quality homes. On the other hand, the proportion of the population renting privately has already increased from 10 to 20% over the past decade, and is expected to grow further in line with other developed markets such as Germany, the Netherlands and the US. Major pension funds from the UK and worldwide are committing £billions to the UK residential sector; Hearthstone’s belief is that, as with other new asset classes and investment styles, residential property fund investing will become established beyond the institutional sector and develop into a mainstream alternative asset class in the wholesale and retail segments. The Fund, established in 2012, invests in new and modern houses and flats across
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