Assetz has launched a Cypriot Property Fund aimed at investing in selected commercial and residential property in Cyprus.
The investment specialist was approached by a group of investors wanting to pool around 10m capital into a Cypriot fund.
The group was seeking a property expert to oversee its launch and advise on its investment strategy.
Stuart Law, managing director of Assetz, says: It seems professional investors with large sums of cash are becoming more confident in their own expertise.
They are identifying broad opportunities themselves for investment on a major scale, but want to avoid the expense and hassle of direct property ownership.
Any group of people with 1m to 2m of cash or more can approach us as an experienced property investment specialist to oversee the creation of their own fund, which as in this case, can possibly be marketed to the wider investor community as well.
Assetz says the Cypriot property market continues to look positive, with demand for property remaining high amongst both foreign investors and local Cypriots.
When Cyprus adopts the Euro in 2008 it will have to decrease interest rates from the current 5.5% to the currently much lower Euro rate, making borrowing cheaper, which is likely to further strengthen the property market.
Capital growth over the last 12 months was estimated at 15%, and with typical rental yields at 8%, the potential return on cash after low costs of borrowing is promising.
The fund will seek to emulate the risks and returns of direct investment in property, with gearing of between 65% and 75%. Capital growth is the primary objective, alongside strong rental income to provide additional profit.
The fund will be targeting holiday apartments and villas with guaranteed rentals to tour operators, locally-let new build apartments in specific cities in response to the strong rental demand from Cypriots, new build commercial property with strong covenant tenants and student apartments.
Law adds: With indirect investment being the only realistic route remaining into property through a pension, the popularity of funds is growing.
This Cypriot Fund will offer the opportunity for investors to enjoy the kind of returns available in prime overseas markets where capital growth and rental yields remain high, but without the time commitment of traditional buy-to-let.
Pension holders wanting to invest for retirement through their SIPP will be able to do so with a minimum of just 5,000, compared to 25,000 for the private equity investor.
The five to seven year closed fund will aim to raise between 10m and 15m capital over the next three months, which will be geared to 40m.
Making a number of assumptions for the fund, including a 5% rise per annum in residential property prices, suggests a possible investor return of 20% p/a or greater after charges.
However all property investors should be aware that many factors can affect the letting prospects and capital growth of property, and there are never guarantees that such returns will be made.
Assetz is the appointed property investment adviser to the regulated Fund Operator.