Equity release group Sovereign Reversions has raised £3.5 million and is upping its stake in Home & Capital Trust (HCT).

Pension Insurance Corporation Holdings, a limited liability partnership which invests in the UK pension and annuity sectors, is taking 7.06 per cent of AIM-quoted Sovereign in a placing at 352.5p. At the same time, Sovereign is increasing its holding in fellow home reversion group HCT from 40.3 per cent to a controlling 76.9 per cent for £671,000 cash down plus up to £405,000 related to five-year performance up to April 2010 in shares or cash, as Sovereign wishes.

Sovereign buys homes cheaply from the elderly who can live in them on below-market terms until death when the company can dispose of the properties. Last month, when Sovereign announced an annual turnaround from £248,000 losses to pre-tax profits of £135,000, chief executive Graeme Marshall said the home reversion market should grow strongly with new Government regulation encouraging independent financial advisers to steer clients to the sector.

He hinted at deals in the offing and now Sovereign is buying its extra HCT shares from John Inskip, the founder of the trust which currently handles 1,800 reversions. According to Marshall, acquiring control of HCT 'enables us to position the Sovereign group...so as to take maximum advantage of the opportunities a regulated market will offer'.

At 352.5p, down from last month's 355p high but up from 2004's 255p low, the shares offer a chance of benefiting from any market acceleration the new regulatory regime does in the event stimulate.

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