Secured lender Wellesley & Co. has just unveiled the world’s first ISA-eligible peer-to-peer investment opportunity.
In March 2014, Chancellor George Osborne confirmed that peer-to-peer investments would be opened up to the ISA market. Nearly a year later, the mechanics of the P2P ISA are yet to be settled upon. Many prominent figures within the industry have voiced their support for a third ISA type – created specifically for the purpose of peer-to-peer investment. But now Wellesley & Co. has seized the initiative.
The rapidly growing platform has launched an asset-backed, listed bond which may be invested into via a stocks and shares ISA. Investors may pour up to £15k a year into the issue, with tax free returns of 4% per annum over 3 years or 5.25% over 5 years. Capital raised by the bond will be subsequently invested into secured loans originated via the Wellesley & Co. platform.
Graham Wellesley, CEO and Chairman of the platform, explained:
“The Chancellor’s endorsement of Peer-to-Peer in 2014 has helped bring the sector into the mainstream and the demand for inclusion in the ISA framework has grown substantially. Whilst the consultation period continues, we have received enormous demand from investors for immediate tax-free returns and Wellesley is pleased to be the first to provide a practical solution to this ever growing consumer demand.”
The “Wellesley P2P ISA Bond” is also unique in so much as it becomes the only retail bond on the market to benefit from the coverage of a contingency fund. Wellesley’s provision pool – now over £9.3m in size – offers an extra layer of protection to the bond’s investors in the event of an underlying default. Investors will also benefit from the fact that the platform apportions its own funds into every loan, as well as taking the first hit in the instance of a default. All private investor funds channeled into the Wellesley platform are fully and evenly distributed across the entire loan book via a continuous rebalancing act.
Nonetheless, some may look upon today’s news with concern – should they share the stance of Charlotte Black (Head of Corporate Affairs at Brewin Dolphin Wealth Management), as outlined in December of last year:
“Introducing debt as a qualifying investment to the ‘stocks and shares’ ISA is bound to confuse and contaminate. We would suggest a separate P2P lending ISA is established to accommodate this new and potentially exciting investment medium. So there would become three distinct ISA categories – cash; equity and debt.”
This is not Wellesley’s first bond issue. In July last year the platform launched the Wellesley Savings Bond – a record-toppling £100m issue. The deal promised 6% gross returns over 3 years, 6.50% over 4 and 7% over 5. Crucially, however, investments in the bond were non-transferrable.
The landmark P2P ISA bond is now open to investment and will remain open until Thursday 12th March. Subscription to the bond has been made available via the SIPP operator and ISA manager European Pensions Management. Wellesley has an approved programme of up to £500m beyond this initial £20m offering.
The take-up of Wellesley’s P2P ISA Bond may serve as an invaluable litmus test for gauging the ISA market’s appetite for peer-to-peer investments. Follow this link to watch Graham Wellesley discuss the opportunity on BloombergBusiness.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.