Andrew Turnbull, director and co-founder of Wellesley, explains how the platform’s property bonds offer an appealingly straightforward and simple investment opportunity…
THERE is a lot to be said for simplicity when it comes to investments. Retail investors are often torn between pursuing complex financial arrangements which offer high returns, and low-yielding yet ‘safe’ options which struggle to reach the rate of inflation. But alternative property lender Wellesley believes it has cracked the magic formula, by offering a series of easy-to-understand property bonds which offer annual returns of five per cent or more.
“People want to see simplicity when they’re investing in something,” says Andrew Turnbull (pictured below), director and co-founder of Wellesley. “They want to buy an investment and have confidence that it’s going to do well, but they don’t want to have to manage their investments proactively. By creating a simple investment in our listed bond we’ve found that it gives people the ability to have something that’s straightforward.”
Over the past five years, Wellesley has split its funding between its two core products – peer-to-peer lending and property bonds – and Turnbull says that the two sides of the business have been equally popular with investors who are seeking reliable returns.
“The reason we think investors like the bonds so much is that they provide a degree of certainty and regularity in the sense that they have a fixed start date and fixed end date,” he says. “They can receive regular payments of interest, and they offer diversification, because they are generally secured upon pools of development loans.”
At the moment, Wellesley is offering a three-year property bond which pays 5.5 per cent, although Turnbull adds that most of its bonds pay in excess of five per cent. The Wellesley Property Bond is eligible for inclusion in a stocks and shares ISA, so savvy investors can also benefit from tax-free earnings. But building this product was not an easy task.
“We spent an awful lot of time and money to set up the infrastructure that made the bond available,” says Turnbull. “Firstly, it is a listed bond, and it is therefore ISA eligible. But it also had a prospectus approved – which means it had to be approved by the regulators. And secondly, we thought it would be really nice to give it independent governance.”
With this in mind, Wellesley approached Intertrust, a global manager of corporate services related to debt issuance. Intertrust acts as an independent overseer, checking on the performance and conduct of the investment.
“The fact that it’s gone through a robust prospectus approval process gives an investor comfort when considering the components of that investment,” says Turnbull.
Within the P2P sector, offering an independent listed bond facility is still somewhat innovative1. Wellesley was the first P2P platform to become involved with property bonds, and it was the first to issue retail bonds. Having issued more than £109m bonds to date, Wellesley is the largest issuer of bonds amongst its immediate peers, making it a pioneer of the property bond market.
The success of these bond offerings has convinced Turnbull that more and more P2P platforms will start diversifying into the property bond market soon.
“I fully expect that to be a medium-term trend,” he says. “People want these types of investment products as we are reducing complexity while feeding the strong investment appetite that sits in between lower return bank savings rates and the potentially volatile investment in stocks.”
Click here for more information on Wellesley.