Mainstream Finds AltFi Investment Tastes Sweet

Regular readers will be aware of our reporting on the way mainstream finance has invested – often rashly and prematurely – in the alternative finance sector. After a long period of difficulty, things appear to be turning round for publicly listed investment fund, Honeycomb Investment Trust. The fund has seen an increase in institutional investor interest according to its recently published monthly factsheet.

The news comes as the fund also released its annual report for the year ending 31 December 2019 yesterday.

Honeycomb reported a net asset value (NAV) return of 7.8 per cent in 2019, a slight drop from 8.4 per cent in 2018.

In a letter to shareholders in the firm’s annual report published yesterday, Chairman Robert Sharpe said its investment manager has “adopted a prudent approach given the uncertain economic environment” but that he expects the “economic environment to create some compelling new opportunities” for Honeycomb.

The annual report also mentioned that two of Honeycomb’s largest borrowers “are in the process of lending under the CBIL government guarantee scheme,” one of which is alternative lender iwoca.

According to the annual report, newly-accredited CBILS lender iwoca was Honeycomb’s sixth-largest asset in 2019, with the holding totalling £16.4m or 2.8 per cent of Honeycomb’s total assets.

Analysis from Liberum shows that “the overall portfolio size has decreased by £22m since the end of February.”

Despite this Liberum added that “the manager retains a confident outlook in the portfolio’s ability to withstand the impact of the crisis given the defensive nature of the portfolio and diversification across different lending segments.

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 £21 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 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.