Numis has already begun the marketing process for the new trust. There will be a placing and open offer expected to close at the end of June, with trading commencing on the LSE Specialist Fund Market in early July.
The trust will invest in a diversified portfolio of UK residential mortgages and target annual total return of 7-10%. The majority of this which will be distributed to shareholders via a quarterly dividend.
The net asset value will be calculated monthly, based on expected arrears and losses. A management fee of 0.75 is planned.
According to Numis the trust is not a play on house prices, and NAV is expected to show very low correlation to other asset classes.
Numis cites the example of Greece exiting the eurozone. In such an event while equity, bond and loan markets would likely take an immediate hit there would be ‘little or no effect on UK mortgage holders making their monthly payments.’
The strategy will be based around securitisation with the trust buying up UK mortgage portfolios and securitising them into AAA paper to provide 4x gearing, versus the 20x generally used by the banks.
