2019-08-01_Shares_Magazine

FEATURE

01 August 2019 | SHARES | 3 

We explain how to get exposure to these fixed income instruments

Should you snap up

the income on offer

from retail bonds?

I

ncome-seeking investors

have had a notoriously

ĚŝĸĐƵůƚƟŵĞŝŶƌĞĐĞŶƚLJĞĂƌƐ͘

As interest rates have remained

ĂƚƌŽĐŬͲďŽƩŽŵĂŶĚƋƵĂŶƟƚĂƟǀĞ

ĞĂƐŝŶŐƐƉĂƌŬĞĚĂŇŽŽĚŽĨŵŽŶĞLJ

ŝŶƚŽĮdžĞĚŝŶĐŽŵĞĂƐƐĞƚƐ͕ƚŚĞ

LJŝĞůĚƐƉĂŝĚďLJďŽŶĚƐĐŽůůĂƉƐĞĚ͘

ƐĂƌĞƐƵůƚ͕ŝŶǀĞƐƚŽƌƐŚĂǀĞ

ďĞĞŶĨŽƌĐĞĚƚŽŵŽǀĞƵƉƚŚĞ

ƌŝƐŬƐĐĂůĞŝŶŽƌĚĞƌƚŽĮŶĚĂŶ

ŝŶĐŽŵĞƚŚĂƚďĞĂƚƐŝŶŇĂƟŽŶ͘

Retail bonds may be one way

ĨŽƌŝŶǀĞƐƚŽƌƐƚŽƐƚƚŚĞLJŝĞůĚ

ŽĨƚŚĞŝƌƉŽƌƞŽůŝŽĂŶĚƚŽĚŝǀĞƌƐŝĨLJ

their income stream – as long as

LJŽƵĚŽLJŽƵƌƌĞƐĞĂƌĐŚ͘

dŚĞƐĞĂƌĞŶŽƚƚŽďĞĐŽŶĨƵƐĞĚ

with the high-yielding mini-

ďŽŶĚƐŽīĞƌĞĚďLJƚŚĞůŝŬĞƐŽĨ

ŚŝůĂŶŐŽ͕ǁŝƚŚŝƚƐΘйƵƌƌŝƚŽ

ŽŶĚ͕ĂŶĚtĞůůĞƐůĞLJ͛ƐWƌŽƉĞƌƚLJ

DŝŶŝͲŽŶĚ͘>ŝƐƚĞĚƌĞƚĂŝůďŽŶĚƐ

are those available through the

>ŽŶĚŽŶ^ƚŽĐŬdžĐŚĂŶŐĞŽŶŝƚƐ

KƌĚĞƌŽŽŬĨŽƌZĞƚĂŝůŽŶĚƐ

;KZͿƉůĂƞŽƌŵ͘

STRINGENT CHECKS APPLIED

hŶůŝŬĞŵŝŶŝͲďŽŶĚƐ͕ůŝƐƚĞĚ

ƌĞƚĂŝůďŽŶĚƐĂƌĞǀĞƩĞĚĂŶĚ

checked and must meet the

ƐƚƌŝŶŐĞŶƚƌƵůĞƐŽĨƚŚĞƐƚŽĐŬ

ĞdžĐŚĂŶŐĞŝŶŽƌĚĞƌƚŽďĞĂďůĞ

ƚŽůŝƐƚ͘dŚĞLJŵƵƐƚƉƵďůŝƐŚĂĨƵůů

ƉƌŽƐƉĞĐƚƵƐ͕ǁƌŝƩĞŶŝŶĐůĞĂƌ

language so that investors

can understand what they are

ŝŶǀĞƐƟŶŐŝŶĂŶĚŚŽǁƚŚĞLJĐĂŶ

ĞdžƉĞĐƚƚŽďĞƉĂŝĚ͕ĨŽƌĞdžĂŵƉůĞ͘

ůĞŶĂŚŝŵŽŶŝĚĞƐ͕ĮdžĞĚ

ŝŶĐŽŵĞƐƉĞĐŝĂůŝƐƚĂƚ>ŽŶĚŽŶ

^ƚŽĐŬdžĐŚĂŶŐĞ͕ƐĂLJƐ͚͗ZĞƚĂŝů

bonds are more robust than

ŵŝŶŝͲďŽŶĚƐ͕ǁŚŝĐŚĂƌĞŵŽƌĞĂŬŝŶ

ƚŽĐƌŽǁĚĨƵŶĚŝŶŐ͛͘

ZĞƚĂŝůďŽŶĚƐƚLJƉŝĐĂůůLJŽīĞƌĂ

higher income than standard

ĐŽƌƉŽƌĂƚĞďŽŶĚƐ͕ŚŝƐƚŽƌŝĐĂůůLJρй

ŽƌŵŽƌĞ͘ŽŵƉĂŶŝĞƐŽŌĞŶƵƐĞ

KZƚŽŝƐƐƵĞƐŵĂůůĞƌƚƌĂŶĐŚĞƐ

ŽĨĚĞďƚƚŚĂŶƚŚĞLJŵŝŐŚƚďĞĂďůĞ

ƚŽǁŝƚŚĂŶŝŶƐƟƚƵƟŽŶĂůďŽŶĚʹ

ŝƐƐƵĞƐůŝƐƚĞĚŽŶKZĂƌĞĂƐƐŵĂůů

ĂƐάϭϭŵ͕ĨŽƌĞdžĂŵƉůĞ͘

This may appeal to smaller

ĐŽŵƉĂŶŝĞƐ͕ǁŚŝĐŚĚŽŶ͛ƚŚĂǀĞ

ƚŚĞŶĞĞĚƚŽŝƐƐƵĞŚƵŶĚƌĞĚƐŽĨ

ŵŝůůŝŽŶƐŝŶĚĞďƚ͕ĂƐǁĞůůĂƐƚŽ

larger and more established

ĮƌŵƐůŽŽŬŝŶŐƚŽĚŝǀĞƌƐŝĨLJƚŚĞŝƌ

ŝŶǀĞƐƚŽƌďĂƐĞ͘

Firms with retail bonds

ĐƵƌƌĞŶƚůLJůŝƐƚĞĚŽŶKZƌĂŶŐĞ

ĨƌŽŵƉƌŝǀĂƚĞĮƌŵƐƐƵĐŚĂƐ

property management group

WůĂĐĞƐĨŽƌWĞŽƉůĞĂŶĚŚŽƵƐŝŶŐ

group A2D to huge household

ŶĂŵĞƐŝŶĐůƵĚŝŶŐZŽLJĂůĂŶŬŽĨ

^ĐŽƚůĂŶĚĂŶĚ,^͘

A STEPPING STONE INTO

CAPITAL MARKETS

ŚŝŵŽŶŝĚĞƐƐĂLJƐ͚͗&ŽƌƐŽŵĞ

ĐŽŵƉĂŶŝĞƐŝƚ͛ƐĂĮƌƐƚƐƚĞƉƉŝŶŐ

ƐƚŽŶĞŝŶƚŽĐĂƉŝƚĂůŵĂƌŬĞƚƐ͕

ĨŽƌŽƚŚĞƌƐŝƚ͛ƐĂƵƐĞĨƵůǁĂLJƚŽ

ĚŝǀĞƌƐŝĨLJƚŚĞŝƌŝŶǀĞƐƚŽƌďĂƐĞďLJ

ĞŶŐĂŐŝŶŐǁŝƚŚĂŶĞǁƐĞƚŽĨƌĞƚĂŝů

ŝŶǀĞƐƚŽƌƐ͘ĞĐĂƵƐĞŽĨƚŚĂƚ͕ƐŽŵĞ

ĮƌŵƐŚĂǀĞĐŽŵĞďĂĐŬƚŽŝƐƐƵĞ

ƐĞĐŽŶĚŽƌƚŚŝƌĚďŽŶĚƐ͛͘

&ŽƌĂŶŝŶǀĞƐƚŽƌ͕ƚŚĞŵĂŝŶ

ĂƉƉĞĂůŽĨĂƌĞƚĂŝůďŽŶĚŝƐƵƐƵĂůůLJ

ƚŚĞĐŽƵƉŽŶŝƚƉĂLJƐ͘ƌĞƚĂŝůďŽŶĚ

OR MORE