Minerva Lending has launched an asset-backed five-year listed bond that aims to offer fixed returns of 7 per cent gross a year.
The Minerva Listed Bond, which will be payable semi-annually, 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.
Investments in the bond fund are asset-backed short-term loans to companies in the UK primarily for the purpose of property acquisition or development. Crucially, the loans are made at a maximum 70 per cent loan-to-value, thus providing a minimum 30 per cent buffer before capital is put at risk.
Funds invested in the Minerva Listed Bond will be spread across a number of loans, providing in-built diversification and thus further protection for investors. The bond is listed on the Irish Stock Exchange and has been subject to extensive regulatory listing checks. It has been approved for listing in the EU by the Central Bank of Ireland.
This also means it is subject to stringent third party corporate governance and provides investors, subject to demand, with the opportunity to sell their bonds in a secondary market. Although it is important to stress that bonds should still be seen as a long-term investment.
The underlying loans are made by Minerva Lending Management Limited, which has completed on £300m of loans to date with no loss to capital.
The Minerva Listed Bond is not covered by the Financial Services Compensation Scheme (FSCS) and as such capital is at risk and investors may not receive back the full amount of their investment.
Charges:
Minimum investment into the Minerva Listed Bond, which can be held in a self-invested personal pension or Isa, is £1,000. There is no upper investment limit and Minerva Lending charges no fees.
Provider view:
Ross Andrews, director at Minerva Lending, said: “The Minerva Listed Bond has been launched to provide investors and savers with returns that are comfortably above inflation with the added benefit of asset-backed security. Crucially, all the loans securing the bond are underwritten by an independent credit committee and are made at a maximum 70 per cent LTV, which offers a significant buffer in the event of default. In other words, you have an asset to fall back on and recoup some or all of your capital should the borrower not be able to repay. 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.”
Adviser view:
Mel Kenny, director and chartered financial planner at London-based IFA Radcliffe & Newlands, said: “A retail bond that is not backed by the FSCS is difficult to recommend. While they have a large number of retail bonds that have provided good returns, others have also blown up leaving little to return to investors. The result is that this type of lottery investing needs to be entered into with extreme caution.”
Verdict:
It is clear that Minerva Lending is offering a means to help investors keep their returns real at a time of rising inflation, without the risk that comes with unsecured loans. And there is no doubt that with fixed returns of 7 per cent gross a year – it is likely to be appealing. However, it is important to remember that it is not backed by the FSCS – and therefore advisers will find this difficult to recommend it to a wide range of clients.
