Online U.K. Lender Starts Marketing Big Bonds to Small Investors

  • WiseAlpha says platform will provide 5% to 8% yields
  • Retail investors can access individual bonds for 100 pounds

A startup online lending marketplace began offering retail investors access to individual corporate bonds for as little as 100 pounds ($132) on Monday.

WiseAlpha said its online platform provides potential annual yields of 5 percent to 8 percent and is a “compelling alternative” to low-yielding savings accounts, the stock market or peer-to-peer lending, according a statement. The average yield on investment-grade corporate bonds in euros fell to a record low of 0.71 percent on Thursday, according to Bank of America Merrill Lynch index data.

Rezaah Ahmad

Source: WiseAlpha

The company will issue notes backed by individual bonds or loans that it acquires, allowing small investors to access securities typically only available in larger sizes, according to the statement. WiseAlpha charges a 1 percent annual service fee and a 0.25 percent sale fee for investments sold in the secondary market, it said.

“The ability to purchase corporate bonds in small denominations has never before been possible for the private investor,” Rezaah Ahmad, founder and chief executive officer, said in the statement. “Retail investors are often crowded out of retail bond issues by institutional investors and their choice is often limited to financial based companies rather than a broad range of corporates across different sectors.”

Senior secured bonds issued by U.K. companies Enterprise Inns, Vue Entertainment and New Look are among those being offered on the platform, which was created in February. It also provides access to senior secured corporate loans from companies including Virgin Media and United Biscuits.

To achieve the yield target, most bonds will be rated between B and BBB, Ahmad said in an interview. The average yield on speculative-grade bonds in euros fell to a more than one-year low of 4.2 percent on Thursday, according to Bank of America Merrill Lynch index data.

The company wants to appeal to younger investors and people who might only be able or willing to commit a few hundred pounds to an investment at any one time, he said.

“Our ethos is that we want as many people as possible to start using the site and gradually educate themselves over time about these financial instruments,” Ahmad said. “We very much want to liberalize this market.”

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