Posted 23rd January 19
Mini bonds can have a high appeal for investors. Whether wrapped in IFISAs, or as specific offerings from brands to existing customers, there are a large number of mini-bonds available to the market and many interesting propositions for investors to consider.
Mini bonds can offer a number of different benefits to investors, including the promise of potentially higher interest payouts compared to other investment products and the ability to directly support a brand or company. Certain products or hobbies – horse racing, chocolate or boutique hotels, for example – often have specific bond opportunities available for interested investors, with famous examples including the BrewDog brewing company bond offered in 2016.
Quirkier examples of mini bond issues include The Jockey Club’s Racecourse bond, which pays 7.75% a year over five years, split between 4.75% cash and 3% in loyalty scheme points; the Hotel Chocolat bond, which lets investors choose between an annual return of 7.25% of in-store credit or 7.33% in the form of a monthly box of chocolates; and the Mr and Mrs Smith bond, in which investors choose between 7.5% a year for four years or 9.5% in points with the boutique hotel chain’s loyalty scheme.
Bonds could be considered to be an efficient way for a more established business to borrow money from investors, and could have the potential to be a viable alternative to offering equity in the form of shares.
It is important to remember that if you invest in mini bonds, you are making a debt-based investment which involves lending money to that company for a fixed period with a fixed return offered. This is very different to other methods of investment. What you are doing is purchasing debt in the form of a unlisted bond, and in return for this financial commitment you will become a creditor of the company and are due to receive regular interest payments, together with the capital sum due to be returned at the end of the fixed term. While mini-bonds may offer a higher rate of interest than some other investment products you are making an investment and Your Capital Is At Risk. It will be to be harder to transfer or sell your investment than when investing in shares and there is no FSCS protection.
The Just bond offering takes the form of mini-bonds. If this product appeals to you, you should review our offering in full before making any decision and read the risk section fully before proceeding any further.
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