Alternative Investment Options – A First Look

When the mainstream falters, alternative finance attracts greater attention from investors. Today, we look at a piece run by our friends at P2P Finance News. The article deals with alternative investment, based on numbers from a player in the alternative investment market.

  • A little independent research shows that there are plenty of alternative data sources for the figures quoted – nevertheless, they can be taken as a basis for investors wanting to do their own research. Meanwhile, the returns (over eight per cent gross) and attendant risks for our own lenders are detailed lower down this article. We run an extended excerpt from the P2PFN article below.

Investors cautious about the uncertain buy-to-let market could seek better returns in alternative investments such as Innovative Finance ISAs (IFISAs), jewellery, fine wine and classic cars, Sourced Capital has claimed.

The peer-to-peer property lending platform looked at the best alternative investments for those wary about entering into the buy-to-let market because of the Covid-19 pandemic leading to mortgage holidays and a government freeze on evictions.

At present, the average UK property provides a rental yield return of just five per cent, or 4.2 per cent when investing in bricks and mortar in the capital.

Meanwhile, Sourced Capital’s IFISA gives returns of up to 12 per cent.

Since 2005, investing in jewellery has proved a better option than buy-to-let, with an average annual return of 6.7 per cent and vintage watches have made returns of 8.4 per cent per annum.

Furthermore, fine wine has seen an average annual return of 13.2 per cent since 2005, while classic cars top the list with a return of 16.4 per cent.

Historical Performance And IFISA Process Guide

  • 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 £23 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 facilitated over £23 million – with only two bad debts so far, representing a bad debt rate of 0.03 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.

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.


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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.