Why we’re moving into listed bonds
Following Wellesley’s departure from peer-to-peer in 2017, the business has recently announced that it intends to move away from mini-bonds, with its sole focus being on fully-regulated, listed bonds. Andrew Turnbull, managing director at Wellesley, explains why
THINGS ARE CHANGING at Wellesley. Over the past five years, the alternative lender has made a point of being ahead of the curve. It was the first peer-to-peer lender to create its own bond back in 2014, and it was the first to offer a listed bond (in 2015). In 2017, Wellesley stopped offering P2P lending investments focussing on bonds and now it is choosing to refine its bond offering to focus solely on fully-regulated, listed bonds.
“If you look at the evolution of the alternative finance market, there has been a lot of movement and that’s not unusual in a young growing industry,” says Andrew Turnbull, managing director at Wellesley. “We’ve been slowly moving towards this.”
In mid-February 2019, Wellesley won the additional permissions required to be able to offer and hold listed bonds directly on its platform for its customers.
“We don’t think there’s anything wrong with the P2P industry at all,” explains Turnbull. “However, in the context of being a residential development lender, we took the view that bonds were a better product for our investors. Since leaving the P2P industry our business plan has been to migrate towards offering fully-regulated, listed bonds because, frankly, we think they give consumers a higher degree of protection than mini-bonds. In being able to offer a fully-regulated, standardised, listed, exchange-tradable product as a fully-authorised firm, it puts our customers in the best possible position.”
These bonds will be offered to investors at the same rates of return that Wellesley’s customers are already familiar with, and Turnbull says that there will be no difference in terms of the underlying investment strategy.
“This is more about the framework in which we offer it and the fact that it is a fully-regulated instrument rather than a dramatic change in our credit policy or underlying approach to risk,” he says. “We found that our customers want the reliability of knowing when the bond starts, what date it is repayable, and what frequency their interest is going to be paid. And that’s something that’s quite difficult with P2P lending.”
Next on the horizon, Wellesley plans to enable trading on its listed bonds, and Turnbull confirms that the firm will soon appoint a market maker to stream live prices on the bonds. This move will add liquidity for investors, who will be able to exit their investments through trading on the exchange.
In response to user feedback, Wellesley is also simplifying its investment process, so investors can make listed bond purchases directly via the Wellesley website and hold them within a stocks and shares ISA wrapper, without having to open an account with a third-party stockbroker. This is a development which is expected shortly ahead of the listed bond launch in the new tax year.
“It’s designed to be a really straightforward investment,” adds Turnbull. “We think our customers will be very happy with the new direction of our business. All of Wellesley’s customers will soon be able to switch their existing mini-bond investments into a like-for-like, regulated, listed bond for no charge and will receive the same rate.”
