Alternative Investments – Current Yields 8%, 9% – Head For Mainstream

What’s alternative as opposed to mainstream? Peer-to-peer (P2P) loan yielding 9 and 8 per cent (our current offerings) are certainly an alternative – providing you understand the relative risks involved – compared to cash deposit accounts. Our recent research shows the average cash return for ISA-linked accounts is just 1.03 per cent. Bear in mind, though, the risk factors (see foot of page, FAQs, and Home page).

Money Marketing looks at this question, and examines in particular what sort of answers investment advisers can provide:

Adviser attitudes towards alternative investments have changed considerably in recent years, but the market remains divided on how they should be used. What was once seen as a niche market has now become far more prevalent and investors are increasingly looking towards alternative investments as a way of diversifying their portfolios and generating returns in a low-yield environment.

Yet there are still debates even about how alternatives should be defined, with investments ranging from antiques, art and wine through to hedge funds, property and commodities. Many are cautious about whether any assets beyond more traditional equities and bonds should become mainstream. Money Marketing spoke with experts to find out what role alternative investments should play in a client’s portfolio and what lies ahead for the future of the market.

Money&Co. is conducting its own research into this area, and we’ll revert with the results later this year.

We currently have two loan offerings on site. The first is from Elliotts Hair, rated B+, with a yield fixed by the auction process. The indicative yield (the credit committee’s estimate, more or less) is 9 per cent gross. The current average of bids is 9.8 per cent, with 55 per cent of the £200,000 loan offer filled. The other offering on site is a fixed-rate loan at a yield of 8 per cent, rated A. It is also £200,000 and is property-backed, with an A+ rating from our credit committee.

A gross yield of 8 per cent equates to a return of 7 per cent net of our fees. If you invest via our Innovative Finance Individual Savings Account (ISA – see below for a step-by-step guide to how this works) you will receive the income tax-free.

All loans on site are eligible for inclusion in a Money&Co. ISA.  If you do not have a Money&Co. ISA yet, please click on the ISA application tab on the Home page and fill in the form.  You will need your National Insurance number.  The ISA allowance for 2017/18 is £20,000 and you must commit funds by midnight on 5 April or you will lose your ISA allowance for this year. For full detail on the process, see below.

A Process Guide To Innovative Finance ISA Investment

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 2018/19 is unchanged from last tax year at ú20,000, 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 ú8,400 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.

It’s relatively easy to logon to our site and register to become a lender. But if that’s all too new-fangled, you can call us on 020 3143 4004 or write to Money&Co., 58 Glentham Road, London SW13 9JJ. We’ll then send you an ISA Brochure, and ISA Transfer Authority form (if you want to transfer monies from a Cash ISA) and a Freepost envelope. Then it’s just a question of following your nose to get that income…


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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.