Eddie Hobbs new Brendan Investments vehicle - summary views

[Brendan Burgess]

I set out to do a balanced assessment of the pros and cons of this fund to guide the average investor. However, as I compiled it, I became increasingly convinced that this is not a good investment. The negatives far outweigh the positives. I have tried to be as balanced as possible but there are few positives.

Where will the fund invest and are these good markets to invest in?

“75% will be invested in commercial property in Germany and the UK
25% will be invested in development projects in Portugual, the UK and Ireland”

No specific projects have been identified. If the fund raises €1 billion, it will take time to identify suitable investments and development projects.

The Management Team may be property experts, but they are not household names for successful property investment. In any event, most of the investment strategy in the prospectus is about what a firm of auctioneers CBRE tells them about the property market. If they are such experts themselves, why are they relying so much on CBRE and presumably paying big fees to them?

The claims they make in their brochure are excessive

“The projected returns marketed by the promoters of certain investment syndicates range from 12% to 16% on the purchase of commercial investments over a 5 to 10 year period.

… the Directors believe that the Company is well positioned to provide investors with potentially higher returns than the returns achieved by those funds which invest in commercial property only.”

There really is no basis for the directors to make such claims. They are saying something along the lines of “With the advice we can get from auctioneers, we will earn returns for you in excess of 16% per annum”.

The risks of failure are high

Property investment and property development are very risky activities.
The property markets may go down over the next ten years.
Property markets may do ok, but the fund may choose badly or manage their developments badly.
Recent money market problems might result in very expensive borrowing within the fund. They might not be able to borrow.

Borrowing to invest increases risk - but this is not unusual
Borrowing or leverage increases the returns but also increases the risks dramatically. To use the example from the brochure

“However, if the underlying assets in Brendan Investments were to drop in value by 20%, then the loss to you would be €80,000 – a drop in value on your initial investment of 80%. In this example your original investment of €100,000 would now only be worth €20,000”

This is not unusual. If you buy a property directly with borrowed money, you will be exposed to the same risks.

Of course, you should not borrow to invest in this product
The gearing within the product makes this very risky. Borrowing to invest in the product makes it even riskier. You will not be able to claim tax relief on the interest paid on the borrowings. See here for more information.


Even if it is a moderate success, the performance fees are huge

If the fund returns in excess of 8% per annum, the promoters will earn a bonus of 20% of the return in excess of 8% per annum. These fees are unprecedented.

Of course, they do not share in the downside.

You are tied in for up to 10 years
There really is nothing you can do if you invest in this. If you invest in a unit linked fund or directly in properties, you can cash them or sell them if you need to. You may be able to find someone else who wants to buy your shares, but this will be difficult to do.

Other factors to consider
The promoters will be charging an annual management fee of 1% of the total assets. This is on the high side.

While the prospectus is regulated, the PLC itself is not regulated. You can’t complain to the Financial Services Ombudsman. You can’t complain to the Financial Regulator. This is the same as buying shares in any other company such as CRH or AIB. An investment in a fund run by a life insurance company such as Friends First would be regulated.

Taxation. This is complicated, but investing through a unit linked fund seems to be more tax efficient than investing through a plc.

Red herrings
Low initial investment – If an investment is a bad investment, this is not an advantage.

Being sold directly and not through brokers. So what? This is only relevant if the charges are lower as a result. In this case, they are higher than products sold through brokers.

Further information


http://www.brendaninvestments.ie/



Alternatives to look at if you want to invest in commercial property
Invest directly in property overseas. Needs more work and much higher amounts, but is more flexible and charges are a lot lower.

From time to time, other funds with similar ongoing charges but lower performance fees come on the market. Augusta is one such example.

Hibernian’s European Commercial Property Fund - pros – better access and ability to switch to other funds, regulated by Financial Regulator, no gearing, run by a fund manager with a verifiable track record. Cons: No gearing, arguably less transparent charges.

Buy an Exchange Traded Fund which invests in quoted companies which invest in European property: such as the [broken link removed]

 

[Duke of Marmalade]

Re: Eddie Hobbs new Brendan Investments vehicle

Advantages:

It brings geared property funds to the mass investing public. Not to be sneezed at.

As with all pooled investment it gives access to professional management, critical mass and diversification which with 5K or even 500K you couldn't do yourself.

The key thing about the borrowings is that they are by Brendan and if things go belly up the banks have no recourse to you the punter. Once the investments have done well enough to pay the interest on the loans and the considerable costs then any additional returns enjoy a "gearing" or magnifying effect. There is certainly the potential to make substantial gains BUT see disadvantages below.

I reject other purported advantages such as the Development angle or the new plc structure.

Disadvantages:

And this is a personal opinion. The party is over. True, some rich folk are sitting on some nice paper profits on similar schemes but the geared property "easy money" can't on basic economic grounds last forever. Goddamit property prices are already beginning to fall. When Show Me The Money punters are pouring their 5Ks into geared property it is reminiscent of the shoeshine boy giving Joe Kennedy share tips in 1929. Suggestions of growth rates from 14% to 37% are quite irresponsible.

The gearing risks are extremely high and misleadingly understated.

The costs are enormous, about 4 times higher than conventional retail investments. However, nothing on this thread has persuaded me that they are especially high for the genre but IMHO the whole genre is a rip off which has on paper got lucky over the last few years.

The lock in term of 10 years is very long. Forget this grey market balderdash. You go looking to cash in your 10K after 5 years and you will find the market black not grey.

It is tax inefficient compared to life assurance investment, though structures have been put in place to minimise these inefficiencies.

I am not very familiar with similar schemes but the management team seems light to me, I would prefer to trust one of the big private banking outfits, but then they won't even consider you unless you are HNW.

Finally, it is impossible to assess this scheme without considering the EH factor. Is it a plus or a minus? I doubt even EH would claim He brings anything to the party in terms of selecting investments - that will depend on the other members of the team. These arrangements are black boxes where the management have an almost blank cheque unlike conventional funds where costs are capped at the management charge. We are also hearing from the roadshows of dirty tricks abounding in this space. I suppose the EH factor, given the huge spotlight, will put manners on Brendan not to be too racy in this respect.

 

[gonk]

Re: Eddie Hobbs new Brendan Investments vehicle

Unlike Harchibald, I do feel there can be a useful place in a diversified portfolio for this type of investment. I don't have any problem with geared property funds in principle and have invested in several. I'll give my summary of the pros and cons of the Brendan fund.

Pros.

1. Low entry level.

Cons.

1. High charges. I won't rehash my previous posts, but I stand over my view that taken altogether, far from having low charges compared to other geared property funds, Brendan's are among the highest I've ever seen.
2. Ten year investment period is too long.
3. I think commercial property has the potential to do well in Germany. They're probably too late for the UK and definitely too late for Ireland. Don't know enough about Portugal to comment. Overall, the inclusion of the UK & Ireland would put me off.
4. No specific projects planned. There is no detail on what the fund will invest in - only broad geographical indications are given. This means it is impossible to assess the merits of the investment and you can only go on the quality of the fund managers. It also means investors' cash could be sitting on deposit for quite some time while Brendan decide what to do with it.
5. The directors have no track record as a team, and the only connection I'm aware of Eddie Hobbs having with property investment is plugging holiday homes in Cape Verde.
6. Given the mass-market level the product is being sold at, its unregulated status is very worrying.
7. The facility to gear up a geared investment is mad. Harchibald drew comparison with the geared tracker bonds on the market a couple of years ago. This is far worse. With a geared tracker bond, in general 100% of the capital was guaranteed and the most you stood to lose was the interest on the loan. With this product, in the worst case you could lose all your own money, the money you borrow, and all the interest on the loan.

I'm not looking for any property investments at present, but if I was I wouldn't touch this one.

Enough has already been said about the Eddie Hobbs factor - suffice it to say this project will either make him very wealthy or destroy his reputation.

 

[Mantus]

Re: Eddie Hobbs new Brendan Investments vehicle

Gonk your sensitivity to Augustus syndicate is telling. Your cons are not supported by the facts

1 High charges. This is a false conclusion when measured against other schemes even those 100% iNVT as demonstrated. Augustus 2.3m upfront mostly commission rebates, 0.75% amc, Hibernian Life Res Fund 1.45% to 2.55% on Gross Fund etc.

2. Its 7 to 10 which is actually better given the property cycle and it avoids the 23% tax payout on the 8th anniversary which is now compressing terms for syndicates.

3. This is the funniest because Brendan is 60% investing in Germany which you like but have listed as a con.

4. Again an false statement as outlined in the roadshows and reported in the media, including a Formula 1. Project on 700 acres Algarve 5 Star Hotel, Dresden Hotel 20 yr lease 6.5% yield etc.

5. The MD has 600m and another Director 1 billion GDV experience.

6. The Prospectus is regulated and there has been enormous scrutiny. Your "worry" is unconvincing given you support and invest in schemes with zero scrutiny and regulation.

7. The gearing from NIB is clearly aimed at HNW based on the criteria and is subject to CPC. Once again a false statement.

As you can see Gonk, all of your cons either demonstrate that you haven't been researching properly even on this thread or you simply don't want to disengage from posting misinformation.

 

[Brendan Burgess]

Re: Eddie Hobbs new Brendan Investments vehicle

This thread is a summary aimed at the ordinary punter who does not have the time to read the other thread and get locked into long debates.

People should only reply to correct major factual inaccuracies.

Any posts which detracts from the summary nature of the thread will be deleted, including:

Red herrings
Opinions - express them in the other thread
Rehashes of arguments - express them in the other thread

 

[Mantus]

Re: Eddie Hobbs new Brendan Investments vehicle

Brendan, you have removed facts here that contradict your own summary which is not balanced as you claim. That removal is a fact. Here are some more facts;

A. You, yourself have a long record in arguing negatively against investing in overseas property both here and in radio interviews.

b. You favour investing in Equities with a bias towards the ISEQ top ten.Most of these plc's have geared balance sheets, investing in shares routinely exposes investors to gearing. It is how the world works. The Iseq is also hugely exposed to Irish property and is a more risky market than Europe.

c. You compare Brendan, a geared PLC with an ungeared Hibernian Life Fund. You ignore the geared Hibernian Fund I have given you and which is a more valid comparison, its European Residential Fund. Your entire thesis therefore about relatively high charges is fundamentally flawed

d. You argue for a life fund wrapper but make no comment about the extra cost loading this will bring. See the higher cost Hibernian RESIDENTIAL FUND.

E. You are incorrect on tax. Brendan avoids the 23 percent complulsory pay out rule. Gross roll up funds pay overseas tax. Brendan uses LUXCO subsidiary to eliminate GERMAN gains tax and a Dutch subsidiary to minimise Portugese.

F. Your flawed summary implies IMHO that the Directors of this company are engaged in an exercise to rip off investors, at best you imply profiteering. If this is your intent you are engaged in defamation.

 

[Mantus]

Re: Eddie Hobbs new Brendan Investments vehicle

G. You state that the directors do not have a pipeline of projects. This is untrue.

H. You state that the charges are unprecedented yet provide no evidence to support this claim and rely on an ungeared unit linked property fund as your benchmark.

I. You further state that Augusta is cheaper. This is simply untrue and is not supported by analysis. It is also unregulated and managed, unlike BRENDAN, on a part-time basis as part of a string of schemes from the same source.

H. Finally, as a matter of fact, your summary is produced by an unregulated advisor with no foreign property experience whatsoever and relies largely from inputs from similar and anonymous sources and mostly from two.

J. Media analysis from good journalists who've equally examined the pros and cons IS balanced and contradicts your views by quite a margin. I refer to best selling financial writer Jane Suiter, award winning personal finance journalist Bill Tyson and Jill Kerby.

 

[Brendan Burgess]

Re: Eddie Hobbs new Brendan Investments vehicle

Hi Mantus - I welcome your response, but you will not be allowed to divert this thread with red herrings. I will deal only with the significant points which you raise.

A. You, yourself have a long record in arguing negatively against investing in overseas property both here and in radio interviews.

To the best of my knowledge, I have never argued against investing in commercial property overseas. I have argued against investing in residential property.

b. investing in shares routinely exposes investors to gearing. It is how the world works.

Valid point. And I have amended the summary to highlight this.

c. You compare Brendan, a geared PLC with an ungeared Hibernian Life Fund. You ignore the geared Hibernian Fund I have given you and which is a more valid comparison, its European Residential Fund. Your entire thesis therefore about relatively high charges is fundamentally flawed

Brendan Plc is a way of investing in commercial property. I am only comparing it with commercial property options.

 

[Mantus]

C'mon Brendan your last point is extremely poor. You've compared a geared and ungeared investment. This is financially inaccurate. You have then come to a set of conclusions. You are now aware of your error and you choose not to acknowledge the mistake.

You are trained in financial management which includes examining projects and your training must inform you that your methodology is corrupt.

 

[MichaelDes]

"I set out to do a balanced assessment of the pros and cons of this fund to guide the average investor".

Brendan,

I think there have been a lot of circular arguments about this subject and your synopsis is correct, given your amendments. There have been too much egotism on the discussion pages. But overall, the reality is that this type of product is being launched to late, compared to other syndicates bought into years ago. No one can argue there is a bang for your buck in either Ireland or UK for commercial property - if there is, tell me where - I'd love to know. As mentioned before, Portugal, has a GDP per capita ranked 34th globally by IMF, unemployment of 8.2% and has according to a European survey by Halifax it has had flat property growth in the last year and 2% in the last 2 years. Not great prospects therefore going forward. Will a few race cars save the day - I don't know but I would not have a strong enough trust. Germany is the only thing that stacks -especially retail but similar to Augusta - retirement homes could be a good move. However given 60% exposure, the rest of the package could be a drag and have an affect on overall performance. Finally, as mentioned previously, money leverage is no longer going to be cheap as it once was. Oh...the good ole days, it was much easier then.

 

[Brendan Burgess]

I think it would be useful to provide links to the media analysis of this product. If anyone has any such analysis, positive or negative, please post the link by reply to this and I will incorporate them into this post.

" Award winning personal finance journalist Bill Tyson" says Widows:steer clear of Eddie Hobbs but to be fair to Eddie, I heard him say this himself on the radio. Bill does not really assess the product - he quotes advisors and the comments here on Askaboutmoney.

 

[gonk]

A review here from yesterday's (16 Sep) Sunday Independent: [by Jane Suiter]

It scores the fund the fund 5 out of 10 - not exactly a ringing endorsement. The biggest issue it has is with the 10 year investment term - "a very long time in anyone's book."

Positive findings it makes are clarity of the fee structure (while noting the directors will make serious money if the fund does well) and the plc structure, which will give shareholders power and force transparency.

It concludes: "If you simply like Hobbs but are unsure of the risks, steer clear."

 

[Brendan Burgess]

And here is Jill Kerby's piece which was in the Regional Newspapers

Jill Kerby’s Moneytimes – Sept 12

Most of the publicity surrounding the launch of Eddie Hobbs’s new property fund has been about the fact that it has been pitched at the ordinary investor with as little as €5,000 to invest and the millions in euro in fees that he and his fellow directors stand to make if it is a success.

Eddie Hobbs’ detractors are suggesting that he is capitalizing on his celebrity status to raise funds from thousands of his fans who watch his TV shows and trust his advice. But while he announced in his press release last week that this is an investment for ‘just about everyone’, he now insists that this product is not for savers, but for investors. The low contribution value was set to avoid being accused of being elitist, he says, and was an effort to include smaller investors in an opportunity that is usually unavailable to them. Most leveraged commercial property funds like this are usually aimed at people with at least €50,000 to invest.

Whatever about the criticism – and I too think that €5,000 is too low an entry price, and that a debt-based investment fund is not suitable for ‘all investors’ – it is still worth judging this product on its own merits.

First, this is a syndicated property fund from a new company, Brendan Investments Pan European Property plc that is regulated by the Financial Regulator and Irish Stock Exchange. It aims to raise between €50 million and €250 million in public subscriptions, and then borrow up to 75% of that amount to buy even more properties in Germany (where 75% of purchases will take place), the UK, Portugal and Ireland.

This type of borrowing is known as leveraging or gearing. And in the same way that you enjoy the entire benefit of any rise in the value of your house, even though you may only actually ‘own’ 10% of it (say if you’ve taken out a 90% value mortgage), so too will you enjoy a disproportionately higher profit if this leveraged fund increases in value.

The Brendan Investments prospectus (see www.brendaninvestments.ie <http://www.brendaninvestments.ie> ) gives a clear example of how this could happen:

“If you invest €100,000, this could expose you to a total investment in respect of the underlying assets of Brendan Investments of up to €400,000. The maximum amount of losses the investor is exposed to is the €100,000 initial investment. This means that if the underlying assets in the investment were to grow by 20%, then the return would be €180,000 – a return of 80% on your initial investment. However, if the underlying assets in Brendan Investments were to drop in value by 20%, then the loss to you would be €80,000 – a drop in value on your initial investment of 80%. In this example your original investment of €100,000 would now only be worth €20,000.

If, however, you decide to use borrowed money to invest in this fund, and an arrangement is in place with National Irish Bank to provide such a service – there is a bigger potential downside if the fund loses money. Again, the Prospectus gives an example which assumes that you have borrowed €50,000 (ie 50%) of the €100,000 you want to invest:

“If the underlying assets were to incur a loss of 20%, then your return would be equal to €20,000 as in the original example. However, as you have borrowed €50,000 [this time], you would still be liable to repay the outstanding balance (and any interest accruing). As your net return was €20,000, you would need to add an additional €30,000 (new funds) to repay the loan. In this instance your total loss would be €80,000 - the original investment of €50,000 and the additional €30,000 to discharge the loan.”

Leveraging is an added risk that smaller investors, who may already have other commitments – like a mortgage to pay off, children’s education, or a retirement they’ve done nothing about – should stay clear of until their finances are a lot healthier.

Is European commercial property a good buy? Over the past 10 years its been a very good buy indeed, but tightening credit conditions, global stock market volatility and the worry that the US economy may go into recession with serious implications for European business and commerce means that perhaps prices have peaked for now. Certainly, there are a number of publicly listed UK-based property funds that have fallen sharply in value this year.

What you really need to do before you commit any money to this fund and perhaps succumb to the ‘Eddie’ factor, is to read the prospectus very carefully and then go and get some independent advice from a fee-based advisor who can also study this offer, compare it to others on the market (ie. compare costs and charges, underlying assets and locations, etc.) A series of roadshows are to be held around the country to attract the buying public, but only go to these already well versed about what is on offer so as not to get caught up in the sales hype.

Eddie Hobbs is dead right when he says that too many people have bought individual overseas property without knowing anything about the country, the economy, tax and legal regulations, etc. Now that residential property is no longer the flavour of the month with small investors, you don’t want to jump into a commercial property venture that you also fail to understand.

 

[Brendan Burgess]

THE SUNDAY TIMES SEPTEMBER 9, 2007
BUSINESS FOCUS

THE PIED PIPER OF PROPERTY

Eddie Hobbs earned people's trust by exposing the Rip-Off Republic. Now he wants them to invest in his fund, but is he just leading them in a merry dance, ask Niall Brady and Mark Paul

The punters began to trickle into the RDS main hall last Friday for the You & Your Money personal finance exhibition almost as soon as the doors opened. Young couples holding hands, old ladies clutching handbags, middle-aged men stubbing out cigarettes at the door: they were a broad cross-section of society, a walking demographic patchwork quilt. As different as they all were, every member of the crowd that shuffled in had one thing in common: they were all there for Eddie Hobbs.

Hobbs, Ireland's self-styled personal finance guru and all-round consumer champion, was everywhere. This was his exhibition, his gig, his time in the spotlight. Besides, it was his magazine that was the show's eponymous organiser. And didn't everybody know it.

"I think he's great, he just knows everything about money," said an elderly woman who had travelled all the way from Laois to meet her hero. The level of affection for Hobbs among the "plain people of Ireland" is palpable, a full two years after he became a thorn in the side of financial vested interests and the government with his Rip-Off Republic exposé.

Last week, as well as fronting his RDS exhibition, he also had the small matter of a ¤1 billion pan-European property fund to launch. Hobbs, the consumer champion, has become Hobbs, the salesman. Brendan Investments, which Hobbs devised, fronts, and on whose board he sits, is seeking up to ¤250m from ordinary Irish punters with as little as ¤5,000 to spare to invest in commercial property in Portugal, Germany, the UK and Ireland.

The company has also set up a partnership with National Irish Bank to lend money to those who want to invest in the scheme, which will itself be highly leveraged.

Hobbs is capitalising on his almost Godlike status among the masses to flog his own products.

THOSE in the know — members of a golden circle that Hobbs talked about on radio during the week — have become even wealthier in recent years using schemes that allow them to borrow to invest. Entry is by invitation only and investors typically need at least ¤100,000 to join the club. Through tabloid newspaper coverage, a round of radio talk shows and an appearance on Friday's Late Late Show — where he buried the hatchet with host Pat Kenny — Hobbs's message was clear: now it's the little guy's turn.

Later this week, Hobbs begins a roadshow for the fund, taking in the ploughing championships in Tullamore as well as stops in towns and cities from Wexford to Letterkenny. The meetings are sure to attract Hobbs's loyal fans, the people who,in their quest for enlightenment about how
to invest their matured special savings incentive account funds, made his book, Loot!, a bestseller. Interestingly, the Corkman gives the following advice on page 150: "Just about the worst place you could pay a booking deposit on a foreign property is in an Irish hotel within a large crowd that's had its dander up following a presentation by an overseas agent oozing charm and simplicity."

Last week, it was put to Hobbs that his position as a consumer advocate and defender of the little guy could be construed as being at odds with his new role: selling shares in a high-risk property company to the masses. He bristled at the suggestion. "A conflict of interest only arises when something is undeclared and hidden. What have I hidden? You could say there is a tension, or a potential conflict of interest. I accept that. But I have not hidden anything."

Hobbs denied the more outlandish claims attributed to him, such as his reported ability to quadruple investors' money, as typical tabloid exaggeration. The fund will boost whatever investors put in by adding bank debt, but not even Hobbs's alchemy can transform this into a fourfold increase in the value of investors' money. "It could be misread by those unfamiliar with gearing in property," he conceded. "Nothing is guaranteed."
Until late last week, though, the company's website included an image of the Evening Herald's front-page story, which breathlessly reported the triumph of "people power" and the riches it would generate for the faithful.

Those riches involve considerable risk, with every ¤1 invested being matched by ¤3 of borrowing. If the fund grows by 20%, investors will make
80%; if it drops by 20%, they will lose 80%. "There's a high level of leverage in this type of investment," said Colm Fagan, a council member and former president of the Society of Actuaries. "Leverage is wonderful when the value is going up but the opposite is also true."

Hobbs makes no explicit projections of what investors might expect at maturity. The marketing literature, though, notes that other property syndicates have forecast returns between 12% and 16% a year. The mention of "future returns" highlights the fact that the way property syndicates are sold is completely unregulated.The Financial Regulator forbids projections by investment funds that fall under its watch, including property funds sold by insurance companies such as Irish Life, Hibernian and Standard Life. Property syndicates, on the other hand, operate in regulatory limbo, leaving promoters free to make whatever claims they wish.

This fact did not interest most people so long as these syndicates remained the preserve of the wealthy, who were assumed to be able to look after themselves. But Hobbs has thrown the door open to anybody with ¤5,000 to invest. "We've a general concern about products that are sold outside of the regulatory net," said Fagan. "The more they are offered as retail products to the mass market, the more concerns we would have."

The actuaries are not alone in their concerns. "Eddie has established such a strong brand that people will follow him blindly into this investment," said Declan Kennedy, an accountant with considerable experience of unregulated investments.

In addition, Hobbs, the bête noire of the investment industry, now finds himself open to claims of levying high fees and charges. It was the Corkman whose vocal lobbying forced insurance companies to quantify the impact of costs on projected returns. The unregulated Brendan Investments outlines its fees in considerable detail but fails to calculate the hit for a typical investor.

Hobbs and his three fellow directors could make anything from ¤4m to ¤10m a year depending on how much money they raise. This comes from a 1% charge that investors will pay not only on the value of their own investment but on the borrowed money as well. He defends the charge on
the basis that one-quarter of the fund will be invested in development properties, which will require a lot more input from management than developments that are already completed.

The fund also has generous performance incentives for Hobbs and his colleagues that kick in if performance exceeds 8% a year. Some similar investments have more demanding thresholds. Kennedy's Augusta fund, which raised ¤15m in Ireland for investment in German property, has to achieve 12.5% a year before a bonus is triggered.

"The fees and charges are probably a bit high, and the performance hurdle may be too low, but at least he is upfront about it," Kennedy said.

Tax could be biggest drag of all on investors' returns. They could be hit with tax twice over: 20% capital-gains tax (CGT) payable by the company when its sells a property; and 20% CGT payable by investors personally on any gains they make at maturity.

The Financial Regulator said it has no control over private syndicates that invest in property, shares or anything else. It approved the prospectus Hobbs prepared for investors, ensuring that the risks are spelt out clearly. Once the fund is up and running, though, investors will be on their own.

The regulator urges everyone to take advice before investing, although Hobbs is happy to allow them in without any handholding. He rejects suggestions that somebody with only ¤5,000 might not be the best candidate for this type of investment. "At what sort of nanny-state level should the entry point be set to keep out people who don't understand the risk — ¤50,000, ¤150,000?" he said. "No other syndicate in the past has issued such a comprehensive disclosure document or been subject to such scrutiny. Most open and close without ever getting past a small group of providers and wealthy investors. I can't go through due diligence with everyone. I can't stand over them with a baseball bat to make sure they read every one of the 92 pages in the prospectus."

AS Hobbs's Brendan Investments marketing roadshow sets off to visit 17 towns in the space of five weeks, he is entering uncharted waters by encouraging his loyal fans to join him on his foreign-property adventure. The irony is that these same people could become his greatest liability, as Eircom learnt to its cost when hoards of angry investors forced the company into precipitous action when the share price began to flag.
"They are the sort of investors that could cause nothing but headaches, on the phone every other day wondering what's happening to their money. It's an end of the market other providers would not touch," said one market insider. "They'll panic if things start going wrong — maybe even force the company to be wound up instead of holding their nerve until conditions improve."

Is Eddie ready for that?

 

[Mantus]

FYI The Sunday Times piece was researched and written by Mark Paul. The "independent" person qouted claiming high charges, Mr Kennedy is not identified as the promoter Augusta. Its pretty poor jounalism to quote a competitor without clarify the vested interest.

Brendan's charges are comparable with stock exchange listed PLC's. Comments comparing it against retail life wrappers are inaccurate. Jill Kerby is incorrect to state that Brendan is regulated, it is not. It is its Prospectus that is regulated, IFSRA does not regulate PLC's.

These articles despite errors are not as partisan as Brendan's summary. The issue about timing is highly arguable. Professional analysts point to very substantial support for the European Commercial Property market over the next decade. The current banking crisis will resolve after some time at high euribor rates. If markets soften in the meantime Brendan as a cash buyer will be very well positioned.

If the armagedonists are right, the pessimists that occupy much of the input to this site, then we should all buy gold and Brendan should be advising everyone to sell off his beloved Irish stocks.

You have done everything you can to argue that Brendan Plc is either a rip off or doomed to fail in a failing Europe. I regard your views as slanted, ill-informed and extremely pessimistic.

 

[gonk]

The "independent" person qouted claiming high charges, Mr Kennedy is not identified as the promoter Augusta. Its pretty poor jounalism to quote a competitor without clarify the vested interest.

He is.

The fund also has generous performance incentives for Hobbs and his colleagues that kick in if performance exceeds 8% a year. Some similar investments have more demanding thresholds. Kennedy's Augusta fund, which raised ¤15m in Ireland for investment in German property, has to achieve 12.5% a year before a bonus is triggered.

"The fees and charges are probably a bit high, and the performance hurdle may be too low, but at least he is upfront about it," Kennedy said.

 

[Mantus]

Brendan I'm finished. Here is my summary;

1.The entry level is low at 5k. This is a valid criticism. Uniformed people could invest despite the five pages of warinings and the interviews given. Accepted.

2. It is 75% geared but so too are any quoted property plc's you care to examine. To criticise this gearing is invalid.

3. The annual mgt charge @1% is no different to, and lower in many instances to quoted Property PLC's. The overall charging including the bonus incentive is not unreasonable. Comparisons against opaque retail unit-linked single premium policies is invalid. These constructions add the inefficiencies of the life office to costs. Brendan's use of an ungeared life fund is financially incorrect and should be acknowledged.

4.The plc structure affords much greater scrutiny to investors and as shareholders gives them rights including an annual set of audited accounts. No life office would bear its total expense ratio in this way. It would penetrate the veil and reveal much higher overall costs than stated in the polcy wrappers and in the disclosure regulations. TER has been discussed frequently here. Since it is not a retail financial product but a PLC it is not covered by the ICS nor is the company itself regulated. Neither is Airtricity or One Fifty One.

5. The Directors have over €1.6bn of GDV experience between them in property and development projects. The Chairman is a SC with an impeccable record. Criticism of lack of experience is invalid and as for NOT HOUSEHOLD NAMES, utter nonesense. The auditors are PWC and the Legal advisors are FRYS.

6. The model is tax efficient using luxco and dutch companies so that earnings returning to the parent are seen as gains. German gains tax is avoided and Portugese minimised. The model does not suffer from the 23 percent compulsory pay out on the 8th anniversary. Criticism about tax inefficiency is incorrect.

7. The investment term is 7 to 10 years. Most investors should hold investment property for even longer cycles but there is nothing incorrect about the term. If investors want shorter terms there are plenty of choices available.

8. The model pursues 25 percent Development. This is a higher risk, higher return sector that, done well, can substantially boost the IIR. It also costs more, typically three times more than investment property to investigate, assess, eliminate, select and manage.

9. Implications that the promoters are engaged in some kind of a rip off of niaive Irish investors is not just inaccurate but defamatory in my view given the extensive way the model has been introduced following 1.5 years of assessment by The Stock Exchange and IFSRA. If this wre the case IFSRA would be mandated to act.

10. I am finished here. I regret if my comments were at times pointed but I was reacting to misinformation and lack of fair play in some, though not all, instances. Au Revoir.

 

[Brendan Burgess]

I am not sure that anything will be gained by summarising this any further.

Please all continue the debate in the other thread.

Brendan