Fixed Income  

Retail bonds to benefit from Budget

The chairman of the Orderbook for Retail Bond Issuers Group, which promotes the merits and understanding of retail bonds listed on the London Stock Exchange’s order book for retail bonds trading platform, said the asset class was due for a boost from investors looking for a steady income.

He said: “Retail bonds are effectively kitemarked by LSE and they enable investors to acquire bonds with yields of 5 per cent plus at issue on a tradable platform with good liquidity.

“We are quite excited to issue more bonds in the future in lieu of people buying an annuity. They need to do due diligence, but direct investment is giving back more power to the investor.”

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Mr Hyman added that from July this year companies will be able to issue bonds with terms lower than five years, which he said made retail bonds more appropriate for inclusion in Isas.

He added: “This is just another bit of deregulation, which widens the universe of options for retail investors.”

Mr Hyman said retail bonds should be considered as part of a diversified portfolio, but that direct access to the asset class gave investors more control over duration risk and specific company exposure.

He added that the majority of issuing companies were recognisable blue chip brands, with Tesco Bank, National Grid, Unite and Workspace all having issued bonds in recent years.

Figures from the London Stock Exchange show that since February 2010 the ORB has raised over £3.9bn with 41 dedicated retail bonds and six retail bond taps.

Adviser view

Adrian Lowcock, senior investment manager at Bristol-based Hargreaves Lansdown, said: “The benefit of using a particular retail bond is you would get a specific yield that does not change over time.

“You know when the bond matures and what your gain or lose would be if you held it to maturity. This can be useful if for financial planning you need a certain income over time and the capital back at specific times.”