By Ryan Weeks on 1st August 2016
WiseAlpha, the alternative investment platform for corporate debt, is opening up access to the senior secured corporate bond market for individual investors.
The new product offering will provide potential returns of 5-8%, and investors will be able to participate for as little as £100. WiseAlpha says that the bond offerings are the same sorts of transactions that the world’s very largest global financial institutions participate in, and which individual investors would not typically be able to invest in for less than £100k per bond. The first bonds to land on the platform were issued by Vue Entertainment, New Look and Enterprise Inns.
WiseAlpha believes the senior secured corporate bond market offers clear advantages over traditional bond markets – which are accessible through the London Stock Exchange or via retail brokerage firms. The platform points to the bonds being secured against the assets and shares of the issuing company as offering “a degree of capital and structural protection for investors”. WiseAlpha also states that the senior secured bond sector encapsulates a broader range of companies. The bonds offer a fixed rate of interest, with investors choosing between quarterly or semi-annual payments, and principal repaid at maturity.
There is no “skin-in-the-game”, as such, because WiseAlpha isn’t an originator of loans. The company underwrites deals in order to bring them onto the platform, where they are then syndicated out to individuals. But WiseAlpha will retain an interest in the loans and bonds in some instances, depending on investor demand. The company is currently looking to secure a credit facility in order to ramp up its underwriting capacity.
CEO Rezaah Ahmad (pictured above) tells us that it’s important for investors to distinguish between WiseAlpha and the more traditional marketplace model. The key difference is that WiseAlpha does not originate loans, instead the platform simply connects investors to existing – but previously inaccessible – deals. Ahmad believes that this is the sweeter opportunity for investors. He said: “We firmly believe that the debt markets offer some of the best and most lucrative long term investment opportunities, which, until wiseAlpha launched, were only accessible to the financial elite, including pensions funds, investments banks and ultra high net worth individuals.”
Ahmad went on to say that retail investors are often crowded out of retail bond offerings in today’s market. He thinks that the ability to purchase secured corporate bonds in small denominations will appeal to a broad range of investors in the “DIY lending movement”.
WiseAlpha raised around £580k on Crowdcube earlier this year, smashing its £350k target. That round valued the company at over £5m.
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.