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Flexible funding: lending to purpose-built student accommodation developers
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Key facts:
Deal type: Development loan for purpose-built student accommodation (PBSA)
Amount: £10.5m
Location: Manchester
Date: 2026
Downing launches new actively managed liquid alternatives fund aiming to deliver 7% to 10%+ per annum and positive returns in most markets. The new MGTS Downing Active Defined Return Assets Fund (‘Active Defined Returns’, the ‘Fund’), is the first fund from its new Liquid Alternatives team.
The Fund is aimed at institutional investors, Discretionary Fund Managers, IFAs and advised sophisticated individual investors, and will primarily consist of UK Government bonds and large-cap equity index options, which provide significant scalability and strong liquidity. It aims to deliver 7% to 10%+ per annum and positive returns in all markets except for a sustained equity market fall (generally more than 35%), over a period of at least six years.
The Fund is the first to be launched by the new Liquid Alternatives Team established by Downing. Collectively, the team has over 125 years of experience and sector knowledge, and includes Tony Stenning, who held senior roles at BlackRock and most recently was CEO of Atlantic House Group; Russell Catley, founder and also a former CEO of Atlantic House Group; Huw Price, a former Executive Director at Santander Asset Management, and Paul Adams, former Head of Cash Equities and Derivatives Sales, Royal Bank of Canada.
The Fund offers investors a compelling building block for multi-asset portfolios, aiming to add consistent and predictable returns, typically secured with a portfolio of UK Government bonds. The unique proposition includes a hybrid approach of using systematic derivative strategies and active management, combining liquid investments with predictable returns, and an equity like risk profile.
Investment strategy: Maximising the probability of delivering predictable defined returns across the economic cycle.
Systematic Liquid Derivatives: Systematic, derivative strategies optimise the equity risk-return profile. The Fund uses rules-based derivative strategies linked to the most liquid, large-cap global equity indices (i.e. FTSE100, S&P500) with the aim of harvesting well-proven consistent returns across a wide corridor of market conditions.
Strong security: The Fund will hold a high-quality portfolio of assets as secure collateral – typically UK Government bonds.
Active benefits: At times, rules-based, passive derivative strategies can underperform when markets move strongly – this is when specialist active management can add incremental gains by monitoring and monetising positions and applying active risk management.
Key benefits
Increased consistency and predictability of returns: Positive returns in all markets except for a sustained equity market fall of more than 35% over at least six years.
Diversification of risk: The Fund’s risk components are diversified across large, liquid equity indices, observation levels and counterparties. Secured with high-quality assets – typically UK Government bonds.
Active management: Our experienced team will actively manage the Fund and its investments to optimise risk and reward for investors.
Russell Catley, Head of Retail, Liquid Alternatives at Downing, said: “Put simply, we focus your investment risk on the probability of receiving the returns you need, not those you don’t. We target the highest probability of delivering 7% to 10%+ per annum with active management adding material incremental gains. We believe that we are building the next evolution of the proven success of Defined Returns funds
The Downing team isseeing strong demand from clients looking for alternatives to large-cap equity funds which are becoming concentrated in technology stocks, or alternatives to UK equity income funds and illiquid alternatives.”
Tony Stenning, Head of Liquid Alternatives at Downing, said: “The launch of our Active Defined Return Assets Fund is a significant milestone in the ambitious build-out of our new Liquid Alternatives strategies. It is a solution-focused fund that should deliver stable high single or low double-digit returns across a wide spectrum of equity market conditions, except for a persistent multi-year bear market. The Fund is designed to enhance balanced portfolios by providing consistent, predictable returns and is suitable for accumulation or drawdown.
“We aim to deliver a unique combination of proven systematic derivative strategies and specialist active management, and we are doing so at a very compelling fee level, below our closest competitors and in line with active ETFs.”
How the Fund is expected to perform in different markets
In bullish markets: UK Government bonds secure the capital, and the equity index options deliver a predictable 7-10%+ return per annum – giving up some less likely upside.
In neutral markets and normal market corrections: UK Government bonds secure the capital, and the index options deliver a predictable 7-10%+ return per annum.
In a sustained sell-off: if markets fall more than the cover to capital loss and do not recover for six years. Then capital is eroded 1:1 in line with the worst performing index.
The average Cover to Capital Loss is targeted at 35%: the average cover to capital loss represents the average level the Global indices within the Fund could fall before capital is at risk.
Fund key risks
Performance: Capital is at risk. Investors may not get back the full amount invested.
Liquidity: Access to capital is always subject to liquidity.
Counterparty risk: Other parties could default on the contractual obligations.
Fund Structure
UK regulated OEIC fund structure, fully UCITS compliant
Daily dealing, at published NAV
Minimum investment: £100,000
SRRI: 6 out of 7
Depositary: Bank of New York
Authorised corporate Director (‘ACD’): Margetts Fund Management Ltd.
I share-class: SEDOL: BM8J604 / ISIN: GB00BM8J6044
F share-class: SEDOL: BM8J615 / ISIN: GB00BM8J6150
Risk warning: Opinions expressed represent the views of the fund manager at the time of publication, are subject to change, and should not be interpreted as investment advice. Please refer to the latest full Prospectus and KIID before investing; your attention is drawn to the risk, fees and taxation factors contained therein. Please note that past performance is not a reliable indicator of future results. Capital is at risk. Investments and the income derived from them can fall as well as rise and investors may not get back the full amount invested. Investments in this fund should be held for the long term.
Important notice: This document is intended for professional investors and has been approved as a financial promotion in line with Section 21 of the FSMA by Downing LLP (“Downing”). This document is for information only and does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities and no reliance should be placed on it. Downing does not offer investment or tax advice or make recommendations regarding investments. Downing is a trading name of Downing LLP. Downing LLP is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 545025). Registered in England and Wales (No. OC341575). Registered Office: 10 Lower Thames Street, London EC3R 6AF.
Why we lent
Manchester has one of the largest student populations in the UK. The city is home to four universities and the Royal Northern College of Music, so demand remains strong for high-quality PBSA to meet the increasing numbers of students descending on the city every year.
The client will be developing a five-storey building in a prime student location using their in-house development team. On completion, the property will deliver 76 studio apartments for students arriving in the September 2027 intake. It provides easy access to studies, work and social activities being:
Seven minutes away from the University of Manchester
Twelve minutes away from Manchester Metropolitan University’s All Saints campus
One mile from the city centre
Image: Construction begins at Renshaw House with Steven Donlon, Andrew Phillips and Sameer Patel, Directors of Harvale 2 Ltd.
Additionally, the client has a strong track record of delivering PBSA with previous development schemes delivered in Stoke-on-Trent and Sheffield. This experience alongside clear student demand and a prime location aligned with our lending criteria.
About the deal
Downing agreed to a £10.5m development loan, in a structure which meant we funded c.95% of total costs.
The deal itself is expected to have a gross development value of c.£20m upon completion.
Downing’s value-add
We focus on being straightforward, simple and supportive. On this transaction, our approach can be seen through:
Straightforward: given the overall loan dynamics we were clear from the outset that a higher loan to cost structure was possible, with our indicative terms closely matching final Investment Committee approved terms
Simple: we moved quickly through our Investment Committee once the client was ready to proceed
Supportive: we provided a higher loan-to-cost than typical, keeping the client's goals in mind and knowing we are backing a client with a strong track record of delivery
Working with Downing
Downing Property Finance offers streamlined financing solutions, free from tedious procedures and delays. Our vision is to make property finance funding simple, straightforward and supportive, enabling our SME developers and intermediary partners to flourish.
Working with us means access to decades of industry knowledge across residential, mixed-use, student accommodation and commercial developments, as well as the provision of flexible solutions to help achieve your goals.
The client said, “Downing stood out as the leading lender for this scheme from the very outset. They demonstrated exceptional speed and efficiency throughout the credit and legal processes, while proactively optimising the loan-to-cost ratio to ensure the overall debt structure worked effectively for the project. Since financial close, Downing have been a pleasure to work with and have consistently processed payments with impressive promptness. Having collaborated with numerous lenders over the years, we are delighted to be partnering with Downing on this exciting new development.”
Align Property Finance connected the client to Downing, sharing, “The property team have been a pleasure to deal with throughout the Renshaw House transaction. From original enquiry to completion and beyond, the team at Downing have provided a fantastic service to all parties involved. We look forward to seeing this high quality PBSA development come to life and look forward to working with the Downing team moving forwards.”
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