Home REIT sister fund calls in investment manager to lead rescue effort
A Home REIT sister fund facing an investigation by the City regulator has called in a new investment manager to try and save it from collapse and salvage tens of millions of pounds of pension cash, Morning Wire can reveal.
Home Long Income Fund (HLIF), a vehicle set up by its former investment manager Alvarium in 2018, was the precursor of scandal-stricken investment trust Home REIT, which announced it would be winding down this month.
While HLIF attracted hundreds of millions of pounds from City investors on the promise of alleviating homelessness and providing a steady return to investors, it has since collapsed in value after a string of its tenants went bankrupt.
The value of the fund halved to around £200m between June 2022 and the end of 2023 and is now under investigation by the Financial Conduct Authority, Morning Wire revealed earlier this year.
City asset management group Atrato has now been drafted in to drive a turnaround plan that involves renegotiating leases with tenants and restoring its rental take, City A.M. has learned.
Atrato, co-founded by former Goldman Sachs bankers Steve Windsor and Ben Green in 2016, previously launched an unsuccessful bid to take over as investment manager of Home REIT but lost out to AEW last year, which has since failed in its plans to restore the company’s finances despite offloading swathes of its portfolio at dramatically cut prices.
Atrato manages some £2bn in assets and runs the London-listed Supermarket Income REIT, which buys up grocery sites and leases them to major supermarkets.
While Home REIT’s troubles have played out in the public eye over the past year, HLIF has avoided the same scrutiny due to minimal reporting requirements placed on privately owned funds.
However, its tenant base included many of the same charities as Home REIT, including the now-bankrupt Lotus Sanctuary, and its rental income has evaporated as a slew of tenants have gone under or stopped paying rent.
Alvarium, which has merged into the Nasdaq-listed firm, Alti, revealed in filings to the US regulator that it is facing two probes from the Financial Conduct Authority over its management of the two vehicles.
“HLIF pursues a similar investment strategy to Home REIT and its financial performance has similarly declined significantly since the end of 2021,” Alti said in filings to the US regulator, the Securities and Exchange Commission.
“The historic management of these funds by certain legacy Alvarium entities is now the subject of investigations by the UK FCA.”
The FCA announced an investigation into Home REIT in January but did not reveal that it was also probing the management of HLIF.
In its filings last year, Alti said it was in the process of “transitioning the management of HLIF to a third-party manager”.
The slide in the value of HLIF’s portfolio is likely to trigger hefty losses for investors that backed the fund, including the M&S pension scheme.
In its investor literature from 2020, M&S touted HLIF as an example of how its investments were having a “positive impact on the planet today”.
“Individuals housed through the scheme are given training and rehabilitation to provide the skills and confidence to find long-term accommodation and re-integrate into society,” M&S said of HLIF in its 2020 report, which it has since removed from its website.
It is unclear how much money the M&S pension scheme invested in the fund in total, but it backed the vehicle prior to the huge decline seen between 2022 and the end of 2023.
The FCA said earlier this year that it was aware of Alti’s filings in the US but “cannot comment on individual cases based on legally binding restrictions placed on us.”
A spokesperson for Alti said: “As we have previously stated publicly, we are in the process of transitioning the management of HLIF.”
Atrato declined to comment. M&S declined to comment.