New ‘mini-bond’ pays 7pc curiosity

A new bond, supplied immediately to traders by peer-to-peer company Wellesley, pays up to 7pc. But there are hazards

  Photograph: ALAMY

Traders have been supplied 7pc interest from a new bond issued by the business behind a peer-to-peer lending website.

The bond, which will be repaid in 5 years’ time, comes from Wellesley, which helps make secured loans on its very own account and then sells them on to savers by way of its site.

Bonds with shorter terms are also on offer: a three-yr model paying 6pc and a four-year bond with a six.5pc yield.

Altogether Wellesley aims to raise £100m from investors who acquire the bonds, producing the problem “the greatest ever”, the business stated.

The minimum investment is £100 and curiosity will be paid twice a yr. The bonds are eligible to be held in Sipps (self-invested pensions), although not all Sipp companies will supply accessibility, but not in Isas, which are limited to mainstream bonds.

Graham Wellesley, the chairman and co-founder of Wellesley, explained: “We’re delighted to be launching the Wellesley Savings Bond, which gives investors highly eye-catching rates in a industry characterised by bad costs that have barely beaten inflation.”

What is a mini-bond?

Like any bond, mini-bonds are in impact IOUs issued by companies, which promote them to traders in return for typical curiosity payments. The difference is that mini-bonds are sold straight and are not listed on any industry. They for that reason can not be traded and need to be held till they mature.

In this respect they differ from “retail bonds”, which are also aimed at small traders but are listed on a particular market place on the London Stock Exchange referred to as the Purchase Guide for Retail bonds (Orb).

Buying a bond that can not be traded does not just take away the possibility to cash in early – the regulatory needs for unlisted or mini-bonds are considerably much less onerous.

Issuers of listed bonds have to problem comprehensive prospectuses and appoint trustees to represent investors’ interests.

As with all bonds, the biggest danger is that the issuer goes bust, which means that bondholders join the queue of creditors.

Read a lot more: Retail bonds and mini bonds: the risks and rewards