Many of the alternative-finance platforms vying for your lending business have something of a “me too” feel to them. “Come to our platform and we’ll lend your money to a slightly different niche market of borrowers,” they shout. Young alternative-investment platform WiseAlpha, by contrast, has a different take. It aims to let investors lend money to fairly well-established, usually very profitable, mid- and large-cap businesses through their senior-secured-note and bond-issuance programmes.
Investing in institutional debt
These loans tend to be targeted at institutional fund managers and hedge funds looking for a decent yield. WiseAlpha effectively pools private demand for these loans to buy them up and sells them back to income-hungry investors. These loans and bonds are usually senior to most other debts, and are secured on the overall businesses or on their key assets. Yields tend to vary between 4% and 7% and the issuers are usually fairly well-known companies.
Currently, they include outfits such as Aston Martin (more on which in a moment), Virgin Media and Enterprise Inns. So, not the real investment-grade tier-one players, but hardly small businesses and start-ups. Nevertheless, they do still carry a fair bit of risk.
WiseAlpha has already cleared about £5m in business, but it needs to get the message about the income opportunities available from lending to profitable mid-sized and large businesses out to more investors. That requires marketing spend, which in turn requires capital. So the firm has just completed a crowdfunding round, raising over £1.2m in equity.
An innovative approach
In the meantime, WiseAlpha is also doing its bit to innovate with some new investment ideas. One product I think warrants some investigation is its new programme of investment bonds. This is where the platform aggregates individual senior secured loans and turns them into a bond which pays a target yield of 8% over five years. These bonds act a little like a corporate-bond fund, but the entity that pays out the income (and on which the bonds are secured) is a special-purpose vehicle with no explicit charges.
The selection of loan notes and high-yield bonds in its portfolio should offer decent coupons and the potential for some capital gains by trading in and out of positions. This kind of investment is very far from being a low-risk corporate-bond fund. But the manager of the portfolio is WiseAlpha’s founder Rezaah Ahmad, who is an experienced investor in structured lending, having worked in this field at many of the big banks.
My guess is that to get that headline yield closer to 8%, the portfolio might feature some of the riskier high-yield issuers – perhaps Aston Martin, for example. This UK-based luxury sportscar manufacturer has a chequered history, but a restructuring and the success of its new model, the DB11, is revving up profits for its shareholders, which include Kuwait’s Investment Dar and Adeem Investment.
Ongoing Ebitda (earnings before interest, tax, depreciation and amortisation) is estimated to be close to £165m for 2017 and WiseAlpha has senior secured loans (with a maturity date of 15 April 2022) yielding just over 5% on a yield-to-maturity basis. Analysts reckon that the business has a £2.2bn enterprise value, and total gearing will be at around 17% – not bad for a company that looks like it’s gunning for an initial public offering.
A hassle-free cryptocurrency punt
In my article on social-investing platform eToro a few weeks back, I mentioned that it is now offering what are called CopyFunds, which allow you to mimic the investments held in the portfolios of their star traders, writes David Stevenson. One new cryptocurrency fund caught my eye. According to eToro the total market cap of all cryptocurrencies has hit $100bn, and the social-investing platform reckons that the number of its users trading cryptocurrencies has grown four-fold in just
The new CopyFund has been trading the two most popular cryptocurrencies – bitcoin and ether – since mid-April and ”has seen returns of over 120% since inception”. According to eToro, the weighting of different assets in the cryptocurrency CopyFund will be determined by the market cap of individual cryptocurrencies. The new fund will be regularly analysed and automatically rebalanced once a month.
I’m a bit of cynic about cryptocurrencies, but even if I were interested in having a punt I’m not sure where I’d start, which is where this vehicle might come in handy. Rather than opening your own electronic wallet and stuffing it full of bitcoins you can invest in an eToro fund that does it for you. The one downside is that the fund is only long these digital currencies – that is, it won’t make money if prices collapse, as I’m sure they will at some point in the not very distant future.
AJ Bell beefs up security
Online broker AJ Bell Youinvest has added the option of two-factor authentication (also knowns as 2FA) to its trading platform, the company said last week. Two-factor authentication adds an extra layer of security when users log in to the website, typically by requiring them to enter a one-time code – generated from a smartphone app or security token, or sent to them by text message – as well as entering their username, password and other security information.
Two-factor authentication has been widely used for email providers, internet banking and payment services such as Paypal for some time, but UK stockbrokers have been slow to introduce it. AJ Bell’s implementation is optional and clients who don’t wish to use 2FA can continue to log in as before.