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New innovative online investment platform raises funds on Crowdcube




By Lisa Walls-Hester on 4th May 2016


WiseAlpha is a new online platform that allows ordinary investors to invest in secured corporate loans to blue-chip British companies. The platform will deliver yields of 4 to 8 percent, via structures called senior loan notes.

This new marketplace marries retail investors with big brand corporate businesses which need to borrow money, such as Virgin Media, United Biscuits, the RAC, and Eddie Stobart.

The platform, fresh out of its Beta launch, says it is tapping the market of individuals who want to earn a higher rate of interest versus a traditional savings account but with minimal investment risk. It is giving investors the opportunity to invest in senior secured notes, which until now is a market that has only been accessible for large financial institutions with minimum investment tranches of £50,000-£100,000. 

Founding Partner and CEO of WiseAlpha, Rezaah Ahmad, believes this is the first platform in the world that gives non-institutional investors access to the corporate debt market.

The platform has been operational since February and WiseAlpha is now raising money from the crowd to fund a comprehensive marketing campaign.

Ahmad says he has developed WiseAlpha for retail investors but he may expand the products to appeal to sophisticated investors or include other asset classes that are not yet on-line or easily available to general investors. He says this niche area of investments is still mostly off-line and largely untouched by fintech. “The secured corporate loan market has been slow to adapt to changes in financial technology and has limited investors of all sizes accessing what we believe is an attractive asset class. WiseAlpha is aiming to change that and bring a wider investment audience to the market."

Existing business focused P2P platforms facilitate secured and unsecured small business loans. Now WiseAlpha is opening up the corporate debt market and it says it will deliver a yield of up to 8 percent (depending on the loan) for investors from large, established brands. It’s an appealing proposition for investors who want a safe home for their savings and the surety of investing in leading household names. Retail investors are more likely to be drawn to investing in companies they know and understand and transact with on a regular basis.

 

The User Experience:

Members deposit money on the platform and then this is used to purchase notes which represent senior secured loans made to large, corporate borrowers. Members are not making a direct loan to a borrower, it is not lending. Instead, the investment is a note which is a debt security.

Interest is received by investors on a quarterly or semi-annual basis with the principal paid at maturity. WiseAlpha collects the interest and distributes it to members and provides account management and reporting tools so members can manage their investments in an easy way. Investors can access their money by using the platforms matched bargain based sale process which provides for the matching of buyers and sellers to enhance potential liquidity. The secondary market for WiseAlpha will be rolled out in the third quarter of 2016 when it has built up enough lender demand and liquidity.

  • WiseAlpha allows investments of £100.
  • The notes are senior secured, which means, in the case of default by the borrower they share the same status as the most secure bonds. In many cases, senior secured loan creditors are ahead of bondholders in the queue. First ranking security over the assets of the borrowing company which offers a degree of capital and structural protection for investors.
  • Rates are linked to LIBOR (a key interest rate benchmark) meaning that coupons could rise with interest rates, unlike traditional fixed income bonds with low coupons and extended maturities.  
  • Loans secured on the assets of the company, offering a degree of collateral backed capital. Ahmad says “In terms of risk, senior secured loans sit somewhere between investment-grade bonds and high-yield. They are safer than high-yield because they are repaid before those bonds and we will only list loans to large companies, which are less likely to fail and have more at stake if they default.”
  • Potential protection for investors because there is less exposure for investors to volatility risk in the price of the underlying shares.

The platform has a Wiseportfolio tool which helps investors diversify by splitting funds lent automatically across all available loans.

WiseAlpha investment terms are five years. The overall fee to use the platform is one percent of invested funds. Selling investments will attract a fee of 0.25 percent.

WiseAlpha Ltd is administered by Apex Fund Services (a big fiduciary administration specialist), which buys the underlying loans and then in effect reissues them as WiseAlpha notes. The Apex connection should offer investors the surety that, even if the platform goes bust, investors still own their underlying notes.

 

The Fundraise:

The team behind the platform hail from Deutsche Bank, TSB and Sainsbury’s bank. Ahmad is responsible for driving the strategic growth of WiseAlpha and says he sees WiseAlpha as a technology company servicing the investor and banking community with a mission to transform the investment industry and capital markets. He wants to build a community of investors and says this is why he has launched the crowdfunding campaign.  

Ahmad says "We believe that crowd-funding is one of the most important financial innovations of recent years and as a company aiming to innovate the large global corporate lending markets in a similar fashion we want to build a community of investors who are interested in helping and being part of our journey as we aim to democratize the financial markets."

The crowdfunding campaign launched with a target of £350,000 for 6 percent equity and is currently 127 percent funded.

Ahmad says the valuation takes into account the market potential of first-mover advantage and £800,000 already invested in developing and launching the platform.

Despite over funding the campaign will continue until its planned expiry.  “While we have hit our target we are very happy for additional investors to join us on our goal to democratize the financial markets. There are still a large number of interested potential investors and so we are leaving the campaign open for now.”

Investors who invest more than £1,000 in the crowd raise will benefit from zero fees on the platform, for life.

Ahmad says "WiseAlpha's mission is to help create a world where every day investors have the same education and investment opportunities available to them that the largest investors and financial institutions have." The platform currently offers only Sterling investments but Ahmad says he wants to expand into Europe and ultimately wants to create a global exchange for loans and all forms of illiquid corporate credit.

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