We are following an old-fashioned takeover battle in the FinTech sector. A market-listed investment trust investing in alternative finance, particularly the platform-lending sub-sector, is the subject of a hostile takeover bid.
As asset valuations for this investing in the sector via this route continue to fluctuate, an alternative route looks more and more attractive. Investors who take the trouble to acquaint themselves with the risks of platform loans, can find excellent returns on their capital. Money&Co. investors have achieved average returns of over eight per cent across more than £20 million loans with an annualised default rate of 0.03 per cent .
Tensions within the listed-direct lending fund world have risen of late following accusations of poor governance by Pollen Street Capital, the manager of the HoneyComb and Pollen Street Secured Lending investment trusts, by the board of the latter fund.
The chairman of the former, Robert Sharpe, meanwhile was waded in by publishing a defence of Pollen Street and the fund’s “extremely positive relationship” with the asset manager.
“The team at Pollen Street has managed Honeycomb since the company’s inception in December 2015. Throughout the whole of that period, my experience is that the team has acted at all times with absolute integrity and good governance. Pollen Street’s interaction with the Board has been transparent and collaborative and they, like us, have always been focused on managing the Company in the best interests of its shareholders,” he said.
“We are very disappointed that the recent PSSL events have been presented in a way which implies that Pollen Street is in some way lacking in any of these qualities. I find some of the accusations very hard to believe, as they do not at all reflect the Honeycomb Board’s relationship with or experience in dealing with Pollen Street,” he added.
Waterfall Asset Management, a US-based investor who said in December 2018 that it would – separately – be investing $1bn in Funding Circle loans, launched a takeover bid for Pollen Street Secured Lending last week.
Yes You Can, rated B, for £30,000 with an 11 per cent fixed yield over five years, is now filled. Project Rhapsody rated A+, with an 8 per cent fixed yield for three years is also filled. More loan offerings will land on site soon.
Historical Performance And IFISA Process Guide
That figure is the result of over £20 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.
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:
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.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.