Minerva Lending today (19 June) launched an asset-backed, five-year listed bond that will offer fixed returns of 7 per cent gross a year, payable semi-annually.
Investments in the Minerva Listed Bond fund are asset-backed short-term loans to companies in the UK primarily for the purpose of property acquisition or development.
The loans are made at a maximum 70 per cent loan-to-value, with bosses claiming this provides a minimum 30 per cent buffer before capital is put at risk.
The bond is aimed at investors seeking to keep their returns real at a time of sharply rising inflation, without the risk that comes with unsecured loans.
Funds invested in the Minerva Listed Bond will be spread across a number of loans, which bosses claimed provided in-built diversification and thus further protection for investors.
The underlying loans are made by Minerva Lending Management Limited, which has completed on £300m of loans to date with no loss to capital.
An independent credit committee carries out checks on all borrowers and securities.
Minerva will only invest in British and European Union-based companies, which minimises exposure to exchange rate volatility.
The minimum investment into the Minerva Listed Bond, which can be held in a self-invested personal pension (Sipp) or Isa wrapper is £1,000.
There is no upper investment limit and Minerva Lending plc charges no fees.
The bond is not covered by the Financial Services Compensation Scheme.
Ross Andrews, director of Minerva Lending, said: “This is a world apart from unsecured bonds and gives investors not only the potential for strong real returns but also all-important peace of mind.”
Patrick Connolly, head of communications of Chase de Vere, said while the returns on this bond appear attractive, it would be a mistake to compare them directly with those from savings accounts.
He said: “There is some security in that the bond is secured against property however this doesn’t mean that investors’ income and return of capital is guaranteed, especially if property prices fall and remember that property is an illiquid asset.
“The bond isn’t covered by the Financial Services Compensation Scheme (FSCS) and so, if the bond is used at all, it should only be for a very small amount of a client’s portfolio.”