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Hedge Fund Invests in Social Housing

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Starting in September, tenants on a waiting list for affordable housing in Luton, a large town north of London, will begin moving into 80 new flats. With hardwood floors and big windows, the properties are very different from some of the ageing council towers that loom on the London skyline.

It is thanks to a new kind of owner that such upgraded accommodation is possible: the buildings are the first affordable housing in England to be developed by a hedge fund.

Cheyne Capital plans a number of such developments around the UK as part of a fund that invests in social housing. The London-based hedge fund says it is in it for social good.

The old assumption is social return compromises financial return, but there’s been a huge change in mindset,” said Shamez Alibhai, a partner at Cheyne Capital who runs the social housing strategy.


Cheyne is aiming for levered returns of about 10 to 12 per cent, though investors must have their money locked up for about three years. It is also charging a 1.5 per cent yearly management fee and a 15 per cent performance fee. It is a sizeable return to chase at a time of low interest rates, when hedge funds are struggling to generate large enough profits to justify their fees.

Cheyne hopes to generate its high returns by using debt. The fund closed at about £250m and borrowed another £500m to invest in the sector, a strategy that will amplify returns, or losses.



Luton council has about 1,200 families in temporary accommodation, Mr Odling-Smee said, and more people are being priced out of the town as rents rise faster than salaries. “There’s a ripple effect as poor people are priced out of London, and that affects us. Prices keep rising in Luton,” he said.



I know the other site that they are looking at in Luton is for IIRC 400 flats so could make a big dent in prospective renters for BTL. With all the new student accommodation going up also I suspect sometime soon some landlords in the town will feel the strain.

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We the English must be harvested for rent by someone.

Wonder how much the bribes were to the Tory Party to make sure the plebs can't afford to buy outright so they have to rent.

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This falls squarely in the category of too good to be true - unless you are expecting Luton house process to increase by +30% over the next few years.

More likely investors will loss a packet while Cheyne Capital makes a fortune on management and loan fees (I wonder how much that £500m loan will be costing the fund - at a guess +12% and a juicy setup fee)  



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