Launching a new holiday business when you don’t actually have any properties for anyone to stay in might not sound like the most promising of starts but that is exactly how the Holiday Property Bond began in 1983.

Today, the scheme provides 55,000 holiday weeks a year for more than 40,000 families and manages a portfolio of around 1,500 holiday properties in 30 popular locations around the UK and Europe.

Behind its succcess is the successful development of a concept offering a more attractive alternative to the traditional “time share”

Robert Boyce, whose son James now heads the business, and Geoffrey Baber started out with the basic idea of creating an investment product which would overocme negative issues associated with time shares.

One issue was a lack of flexibility, in that a time share related to a specific property between specific dates.

It was possible for owners to “swap” their entitlement for another time share holder’s dates at an alternative location but this, says James Boyce, tended in involve both an annual membership fee to join an exchange organisation and an additional charge per booking.

Another issue was that, if time share owners wanted to sell their investment, it was usually necessary for them to use an agent, the only alternative being arrange a sale themselves.

Perhaps most seriously, however, there was no “trustee” to protect owners in their relationship with the developer or promoter of the scheme into which they had bought, and there was no control over the maintenance costs charged.

The concept behind the Holiday Property Bond, which was the result of 18 months of development work before it was eventually launched, was to address all of these issues by enabling investors to buy entitlement to a range of different properties through a financial product which could more easily be traded in.

In terms of selling an investment, the unit trust rules in place at the time did not cover property-based products and so a life assurance approach was adopted.

Bond holders are allocated units, according to how much they have paid, and a value for units is published on a monthly basis so that anyone wishing to sell can simply write a letter asking to cash in their units at the prevailing price. There is, therefore, potential for capital growth, although the usual warning that the value of an investment can go down as well as up does, of course, apply.

The scheme offers greater flexibility compared with a time share, says Mr Boyce, because the bond offers investors access to a range of different properties in different locations, with the size of their investment giving them a fixed number of “points” to “spend”, and points can be rolled over from one year to the next.

Each property is “priced” in terms of points, with the price varying according to the size and location of the property and the time of year. Investors can therefore spend their points where and when they choose, with the additional advantage that the time share exchange fee is also avoided.

Because the investment is in the form of a life assurance policy it is subject to formal regulation (by the Financial Conduct Authority under the latest change in the UK regulatory regime) and the property fund is protected on behalf of investors by HSBC Trustee (Guernsey) Ltd, part of the HSBC group, which ensures that it is ringfenced and not exposed to the trading risks of the management company.

Finally, in place of a maintenance charge usually payable by time share owners whether they use their property or not, HPB applies a user charge for each holiday taken which, says Mr Boyce is related directly to the running cost of the site on a no-profit basis.

Having developed a concept which ticked all the boxes in terms of flexibility, protection and charges, there was, of course, the challenge of starting from scratch with no investors and no properties to offer them.

A guarantee was provided that the first six properties would be bought back and the investors refunded if the concept did not take off and investors were made aware from the start that they would not be able to take a holiday for the first nine months.

The offer proved sufficiently attractive to secure investments totalling about £365,000 from around 50 bond holders by the end of year one and the first holiday claimed by an investor was taken in March 1984 in the first HPB property to be acquired, in the Canary Islands. A second property, this time in Norfolk, quickly followed.

Today, there are around 41,000 bond holders and the property portfolio is worth around £280million. Typically, HPB acquires sites for conversion or development ? often this has involved derelict country houses and in one case even an entire derelict village ? so there is a strong property development side to the business.

The cost of conversion is often many times the purchase price, with HPB properties typically offering a higher specification than is usually found in the mainstream holiday lets market. All projects, however, have been paid for in cash, with no borrowing being incurred.

In addition to new developments, some “ready made” properties have been acquired over the years and HPB also offers some leased properties in locations, such as Greece, to where flights are only available in the main season. Most of the properties directly owned by the fund are available year-round.

Locations well represented within the portfolio include Lake District and Norfolk in the UK, Britanny and the Dordogne in France, Tuscany in Italy, Almeria in Spain and the Algarve in Portugal. Around 20% of the estate consists of apartments with three or more bedrooms, with the bulk of the portfolio split evenly between one- and two-bedroom apartments.

The HPB group of companies is still largely owned by the Boyce and Baber families, with Isle of Man Assurance, the original issuer of the bond, also retaining a stake even though it no longer provides the policies.

HPB is based in the centre of Newmarket, in a complex of offices which it first acquired in the late 1980s and where it has steadily occupied additional space over the years as it has grown and the original tenants have moved out.

Today, it employs around 110 people in Newmarket, which includes the sales and marketing and creative teams, property management and ABTA/ATOL travel services for booking flights and cars on behalf of bond holders. A further 600 or so people are employed nationally and internationally at its holiday sites.

The portfolio continues to grow, with the company consulting with bond holders on where it should invest and all schemes being signed-off by a committee. (The committee also acts as a “watchdog” for bond holders in other ways, and any complaints by property users which are not satisfactorily resolved with the management company go before an arbitrator, whose decisions are reported in a regular bond holders’ magazine.)

The ongoing expansion of the portfolio is funded by the addition of between 1,500 and 2,000 new bond holders each year. This, says Mr Boyce, is about the right level of bond sales in relation to the number of sites of sufficient quality it is possible to acquire and develop.

With around 40% of sales being the resulting of referrals from existing bond holders, it appears that the concept developed 30 years is as relevant now as it was then.