Eddie Hobbs new Brendan Investments vehicle

This is a very long thread. The views of the contributors are summarised in here.

Brendan
Administrator



Just heard Eddie on Today FM discussing [broken link removed] Pan European Property plc, of which he is a non-executive director (and presumably the principal marketeer.) I'm guessing it's not the last we'll hear of this.

Just had a quick glance at the website - it seems like a good way to invest in European property and so would make a useful addition to a diversified portfolio.

The brochure does make it clear but I think it's worth repeating again and again: - the fund will be 75% geared, i.e. if you invest €10,000 they will borrow another €30,000. This can multiply your return if the investments appreciate in value, but equally it can multiply your loss if investments go down.

They also have a facility to borrow from National Irish Bank to invest in this product - borrowing the same amount as you invest. This would definitely only be suitable for those with a high appetite for risk as you'd be borrowing to invest in a fund that itself borrows.

I have two questions -

(1) What does everyone else think of this new fund?

(2) Was the name inspired by our great leader?

P.S. - As a Multi Agency Intermediary, I don't have an agency to sell this product so views epressed in this thread are personal.

LDFerguson said:

They also have a facility to borrow from National Irish Bank to invest in this product - borrowing the same amount as you invest. This would definitely be suitable for those with a high appetite for risk as you'd be borrowing to invest in a fund that itself borrows.

Click to expand...

Yikes!!!

Was the name inspired by our great leader?

Click to expand...

No chance it was inspired by the Saint Brendan - as in the mental hospital in Grangegorman?

heard him on radio too, it did catch my interest because its Eddie Hobbs and I put him with saving money! Clubman you reply makes me think otherwise

This does seem a bit scarey.
Exposing a geared product to the general public and then encouraging them to gear to invest in it! On top of that they are using Eddie Hobbs to entice them in. I can already hear them say "Gearing, whats that, sure if yer man Hobbs is behind it then it must be OK".

Seems reasonable enough, however....................

My concerns would be that your money is locked in for ten years, similar enough to a pension except you get tax relief on a pension !!

The promoters seem individually well qualified in their respective fields but not established as a team and not established in this type of venture.

Seems the returns will manifest itself in a "capital gain" on the shares after 10 years. Let's hope the capital gains tax rate remains at 20% in ten years time.

It wasn't quite clear to me what the directors were entitled to pay themselves along the way or in respect of their founder shares at the end.

LDFerguson said:

They also have a facility to borrow from National Irish Bank to invest in this product - borrowing the same amount as you invest. This would definitely be suitable for those with a high appetite for risk as you'd be borrowing to invest in a fund that itself borrows

Click to expand...

This is not only extremely high risk - gearing a geared investment - but tax-inefficient. You cannot offset the cost of borrowing against any gains made. Compare this with a loan for direct investment in property where you can get interest relief on rental income from any property you own.

Borrowing to invest in this way also limits your capacity to borrow for other purposes. Say you borrowed to invest. That money's locked away for the investment term. A couple of years later your family grows in size and you want to trade up to a bigger house - the money you owe on the investment will be taken into account by the mortgage lender when deciding how much you can borrow.

By comparison borrowing within a syndicate or fund would not count against one's personal borrowing capacity. It would also almost always be non-recourse, i.e., if the value of the investment properties fell below the loan amount, the individual investors could not be pursued for the shortfall. This would not be the case with a loan to invest in this product.

For all these reasons, I believe offering this facility borders on recklessness.

That said, this product compares favourably with other such funds in a couple of respects: min investment of only €5k, compare to €50k, €100k or more for other funds; gains taxable at 20% as opposed to 23% in most other funds.

It compares unfavourably in terms of the investment period - money is tied up for ten years, compared to between three and seven for similar funds I've looked at.

I note they're pretty coy about possible returns - they mention projected returns in other funds of the level for which Augusta came under heavy (and I believe unwarranted) criticism on AAM and say they can do better, without naming a figure.

The prospectus says there is an annual fee of 1% of the gross property value payable to the directors. As €4 of property is bought for every €1 you put in, that means there is a fee of 4% per annum on what you put in. In addition they get 20% of any return over 8% achieved. 4% per annum seems pretty astronomical, not to mind the other fees on top?

Quite apart from the fees, borrowing (at current rates, say 5%-6% with no tax relief) to invest in a company that is mainly involved in borrowing sounds to me like an extremely high risk activity.

I'm a bit of a novice but kinda like the idea given that the entry point is as low as €5000. On [broken link removed] there is a link to download the [broken link removed] and a [broken link removed] which seems to give huge amount of detail, I'm wading through it at the moment and will keep ye posted.
(I'm definitely not going to borrow to invest, surely thats been a no no since the Eircom days).
Czechmate says "there is a fee of 4% per annum on what you put in."
can you tell me where you read that and maybe link to it as I cant seem to find it. Thanks J

I know it's good to be careful but is there too much negativity about this? It strikes me as the perfect vehicle to invest in property without the hassle. This is something I have dabbled in and am currently trying to get another foreign property or two up and going but find I simply haven't got the time, the knowledge or the contacts to do it the way I'd like to. If we're paying fees to Eddie's gang, is this not fair allowing for the fact that we're using their expert time and knowledge?

Finuser, please clarify what you mean by the comment - "I can already hear them say "Gearing, whats that, sure if yer man Hobbs is behind it then it must be OK".

pc7 said:

talking there on newstalk this morning about the management fees, sound quite large,

Click to expand...

They are.

1% annually of the value of assets under management plus 20% of any gains in excess of 8% p.a.

Compare this with the 6th Augusta Fund, discussed here:

http://www.askaboutmoney.com/showthread.php?t=59497

Augusta charge 0.75% annually of the value of assets under management plus 15% of any gains in excess of 12.5% p.a.

Brendan Investments are much higher and they have set themselves a much lower threshold for performance bonuses.

(By the way, my only connection with Augusta is I have an investment in one of their earlier funds. I'm just using their fees as an example, and in fact Augusta's would not be regarded as particularly cheap for this type of investment.)

Oran Man said:

I know it's good to be careful but is there too much negativity about this? It strikes me as the perfect vehicle to invest in property without the hassle.

Click to expand...

I agree this type of fund can be a good way of getting the benefits of a geared property investment without any hands-on effort.

In this specific case, I do think you'd be very ill-advised to gear up what is already a geared investment.

The fees are also very high especially given this is a new team with no track record.

gonk said:

The fees are also very high especially given this is a new team with no track record.

Click to expand...

But this is Eddie Hobbes,champion of the ordinary Irish person,how can it possibly fail.

Interesting to see how much of a response they get in the current market climate.Obviously they would have done a lot better a year ago.

I think with Eddie's persona fronting it they will get the numbers on board, its like the remortgage ad carol voderman did people see the celeb persona and think its a good runner, (imho)

janice_d said:

(I'm definitely not going to borrow to invest, surely thats been a no no since the Eircom days).

Click to expand...

So presumably you should avoid this product since the gearing element within the fund surely means that anybody who invests is implicitly borrowing more which is also invested? The second borrowing option is outside of the fund so you can borrow money which is invested and then even more money is borrowed on the back of that.

How different is the underlying asset from the index tracked by the ?
If one wants exposure to European commercial property can anyone see any disadvantages in investing using this approach?

So if you put 5000 into this, are you limited to losing the 5000 only or are you liable for the extra 75% that is borrowed against your money?

Ceres said:

So if you put 5000 into this, are you limited to losing the 5000 only or are you liable for the extra 75% that is borrowed against your money?

Click to expand...

No, you are not liable. The borrowings within the fund would be non-recourse - that is, if the value of the fund's investment falls below the level of its borrowings, the lenders cannot pursue individual investors for the shortfall.

This does not apply if you take up the facility to borrow money to invest in this fund!

In this situation, in the worst case if the investment company fails with no payout to investors, you still have to repay the money you borrowed to invest. (I'm not saying, by the way, that this is likely. But presumably it is possible in an extreme situation, say a 1929 style global crash and depression.)

Also bear in mind with leverage that small price changes in the underlying will tend to have large impacts on the value of your investment. As a strategy it is nothing new but why they are encouraging ordinary investors to leverage an already leveraged deal though is beyond me.

diarmuidc said:

How different is the underlying asset from the index tracked by the ?
If one wants exposure to European commercial property can anyone see any disadvantages in investing using this approach?

Click to expand...

Good point. Also, you can invest directly in any number of quoted property management companies. I know that threads on single stocks are not allowed here but for example you can buy shares in a UK quoted property management company (or an ETF as diarmuidc pointed out) with no annual management fee and no performance fee.

The fee structure for this vehicle is not dissimilar to that of a hedge fund but very few hedge funds (despite what you may read in the press) gear themselves this much.