Managed Portfolio Service – Property-Backed 7% Target Yield Could Be Yours
As reported yesterday, Money&Co. has asset-management permissions from the Financial Conduct Authority – a quality that’s pretty much unique in the peer-to-peer (P2P) sector. Aside from the high level of transparency required on a regulatory level, there’s a substantial business benefit: our ability to offer a proper managed portfolio service. Below we set out the basic detail.
Managed Portfolio Service
Clients of the Money&Co Portfolio Service have access to loans with a typical fixed return of 7 per cent, without the need to manage a portfolio of loans. You will receive a quarterly statement with detail of what is held in the portfolio and all transactions during the quarter.
Money&Co. loans are typically asset-backed, meaning Money&Co. has a charge on behalf of its lenders over an asset, usually a property. Money&Co. will ensure that there is sufficient headroom to allow for any financial shocks and that it will be able to recover lenders funds if the borrower is in default. Nonetheless, lenders must understand that their capital is at risk.
As the client, your portfolio will be managed according to parameters agreed with you at the outset. You can elect to have interest from your loans paid out twice annually, or retained in your portfolio for reinvestment.
Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee).
That figure is the result of over £17 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
Money&Co. has been lending for over 5 years and has only had one bad debt so far, representing a bad debt rate of 0.04 per cent per annum.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income.Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.
The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.