Listed bonds and mini-bonds are experiencing a surge in popularity. Andrew Turnbull, managing director of Wellesley Group, explains why…
LOW INTEREST RATES AND stock market volatility have had a disruptive effect on savings and investments across the UK. Over the past year, it has become increasingly difficult for conservative investors and savers to see inflation-beating returns, and so they have begun to turn to bonds and mini-bonds.
“Bonds are an age-old instrument but within the alternative finance space, their popularity has increased,” says Andrew Turnbull, managing director of Wellesley Group. “And we all know why that happened – the banks weren’t offering much interest, so the prospect of making a good rate of interest on a deposit was non-existent.
“Therefore investors had to take some credit risk to make an inflation-beating return, particularly if they didn’t want to go into the stock market.
“What that’s done is created popularity for bonds, and we’ve noticed more and more ISA transfers into these types of investments over the past year.”
Wellesley Group was one of the first alternative lenders to offer bonds. In fact, its first bond offering was launched more than five years ago, in its first year of trading. Now, many alternative lenders and P2P platforms are in the bond business, and demand is growing.
“One of the reasons why we think popularity in the bonds has increased so much is, frankly, their simplicity,” Turnbull explains. “It’s the fact that someone could start a bond on the first of the month, for example, and their repayment date is on a set date three years later, with interest paid at predetermined intervals.
“This regularises the investment experience and that’s what people want.”
Wellesley Group has three different bond programmes on its platform at the moment: one listed bond and two mini bonds which are not listed on an exchange. Through these products, Wellesley Group has issued “a multitude” of different bonds, ranging from one to five years, with each one generally paying out between one and six per cent.
“We noticed the potential for mini-bonds well before our competitors did,” says Turnbull. “We actually took our inspiration from John Lewis. At the time, they were the largest issuer of mini bonds and we thought that was such a clever, simple investment. So back in 2014, we created the first ever unsecured, unlisted mini-bond.”
A secured mini-bond programme followed, and again Wellesley Group was the first to offer this sort of product on the market.
“We wanted to issue a best-in-class investment product,” says Turnbull. “And moving into listed bonds complimented what we did because they are ISA eligible, they have an improved prospective, and they are tradable, which adds liquidity.”
Despite the success of these bonds, Turnbull says that his goal is to make mini-bonds “more mainstream”. This may involve offering listed bonds under the Wellesley Group banner, rather than via third-party investment platforms such as The Share Centre, which currently acts as an intermediary for Wellesley Group bonds.
Whatever the future brings, Wellesley Group has already cemented its reputation as a trailblazer in the alternative finance bond space, and that may be the very thing that alternative finance investors need right now.