FCA to scrutinize Home REIT's operations
FCA Launches Investigation into Home REIT Amidst Suspended Shares and Allegations of Inflated Property Prices
The UK's Financial Conduct Authority (FCA) has announced an investigation into Home REIT, a social housing investment trust, over its actions between September 2020 and January 2023. The investigation comes as investors have expressed frustration over the fate of Home REIT, with its shares suspended for over a year.
Founded in 2020 with a mission to provide sheltered accommodation for the homeless, Home REIT raised £240 million in its initial public offering (IPO), making it the largest IPO of any investment trust that year. However, by the end of 2022, its share price had fallen by 70%, and in its latest trading update in December 2023, Home REIT disclosed that its property portfolio had dropped in value by more than 50%.
The FCA's investigation will cover this period, but it has not specified the nature of the stress tests for LDI funds mentioned in a previous report. The report by short seller Viceroy Research alleges that Home REIT acquired properties at inflated prices, affecting the trust's net asset value (NAV) and fees to its manager Alvarium.
Home REIT has vowed to "cooperate fully" with the FCA in its investigation. Alvarium Fund Managers Limited was the former investment manager of Home REIT, which has since gone into administration.
A campaigner has made a claim about the Woodford agreement, but the FCA's probe does not mention any connection to this agreement. There is a claim that a Woodford agreement threatens consumer protections in other financial products, but no new information about this is provided in this paragraph.
One short seller has called for people to be sent to prison over the Home REIT affair, but no new information about investor frustration or calls for prison sentences related to Home REIT is provided in this paragraph.
It is worth noting that Home REIT conceded in August 2023 that part of its portfolio was in the private rented sector, contrary to its mission to invest in social housing.
The FCA's call for stress tests for LDI funds is not directly linked to Home REIT, but it adds to the growing concerns about the stability of the investment sector. The nature of these stress tests and their implications for LDI funds remain to be seen.
As the investigation unfolds, investors and the public will be closely watching the developments surrounding Home REIT and the FCA's findings. The outcome of this investigation could have significant implications for the investment trust and the wider investment sector.
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