Hearthstone Residential Property Fund receives a DT3 risk rating


Hearthstone Investments’ UK Residential Property Fund has been independently risk-rated by market-leading risk-profiling company, Distribution Technology (DT) against the risk profiles it uses on its Dynamic Planner® platform.

Distribution Technology has assigned the residential property fund with a risk rating of 3 on a scale of 1 (lowest risk) to 10 (highest risk).

DT’s risk-assessment was based on data provided over a seven-year period from December 2005 through to December 2012. Despite the assessment period encompassing some of the most challenging and volatile market conditions at the height of the global financial crisis, the Hearthstone fund was awarded the relatively low risk profile (DT3).

To conduct its assessment, DT modelled 85% residential property (LSL Acadametrics UK House Price Index), 10% Cash (IMA Moneymarket) and 5% equities (comprising a basket of 4 house builder equities).

DT’s analysis also highlighted that over the seven year assessment period, the LSL Acadametrics index – which the Hearthstone fund uses as its benchmark – exhibited lower volatility than both the Investment Property Databank (IPD) index and the Halifax House Price Index.

DT’s findings also support detailed analysis by Hearthstone, using data from respected sources such as LSL Acadametrics, ARLA, IPD and Barclays Capital, which indicates that the UK residential property market produces low volatility and non-correlated returns compared to other asset classes.

Commenting on the risk-profile assessment:

Mark Forman, Distribution Director Hearthstone Investments said,

“In the post-RDR environment risk-profiling of funds takes on even greater importance. It is essential that advisers can make recommendations to clients in accordance with the appetite for risk that they have jointly determined appropriate. We are therefore delighted that our fund is now able to be placed within this universe, particularly as it falls at the lower end of the risk spectrum, which corroborates and underlines our own existing analysis”

“Whilst historical results only provide an indication of future performance, it is fair to say that a broadly diversified and professionally managed UK residential property investment offers the potential for positive real returns and a yield from rental income derived from investing in bricks and mortar, all within a fully FCA authorised structure.”

Phil Morse, Director of asset management clients at Distribution Technology, said:

“We are pleased to announce that following extensive analysis and assessment, the Hearthstone fund has demonstrated that it fulfils the criteria to be awarded a low risk ‘3’ rating. Many advisers are still looking for lower risk funds and portfolios, so the risk profile 3 attributed to this fund will help in the selection process and will facilitate advisers in making recommendations to invest in this new type of asset class.

Our risk-profiling is based upon a number of quantitative and qualitative factors such as volatility and performance, all of which have shown that as an asset class residential property is relatively low-risk and helps diversify portfolios”.


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