Corporate Bonds 2019

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C O R P O R A T E B O N D S - T R A N S F O R M I N G T H E M A R K E T 2 Commercial feature Why did you create WiseAlpha? While working in the banking industry, I was struck by how closed and elite the corporate bond market was. Clearly, a full-scale liberalisation of this market was necessary. It's crazy that you can invest easily in the equity of a large company, such as Ocado, but can't easily buy its bonds. What's next for the platform? We are the UK's only digital bond market and we want to expand into a platform that is scalable globally. People are on the hunt for better yield and reliable interest income, so provid- ing access to the corporate bond market is essential. Not everyone wants to go on a wild Investors using WiseAlpha can tap into the broad diversification and strong returns available from the wider corporate bond market. According to Barclays, over the last 20 years, sterling investment-grade corporate bonds returned 6.1 per cent 4 , compared with the 5.1 per cent available on FTSE 100 shares 5 . Sterling high-yield fixed income has generated 10.4 per cent 6 . "Investors are wise to consider a more diverse portfolio to reduce their risk and with a much bigger weighting to fixed income. Corporate bonds are the perfect addition to a portfolio and their returns are consistently higher than stocks and shares over the medium term," says Mr Ahmad. For those new to investing or to corporate Digital bond marketplace Rezaah Ahmad, founder and chief executive of WiseAlpha, explains the creation of the digital bond marketplace stock market ride and many want greater portfolio diversification. Corporate bonds are being called the must-have investment product for 2020. Why? Recent years have seen a rise in prom- inence of "exciting" alternative assets that have become problematic. I'm think- ing particularly of cryptocurrencies, which have been heavily exposed to fraud and volatility. By contrast, bonds are a major, established asset class that has delivered superior risk-adjusted returns. Corporate bonds issued by recognised corporations have been unavailable to most of us, while smaller businesses' bonds and peer-to- peer (P2P) loans have become plentiful. It's like going into a shop and only finding cheap cola instead of Coke or discount chocolate instead of Cadbury. With WiseAlpha, the quality and well-known option is available for the everyday investor. Why is P2P lending so problematic? Peer-to-peer lending promised returns above savings account rates and this won it a fair few investors before the regulators started to clamp down. While it may be a potentially interesting option for investors who are aware of the risks, rising loan defaults, declining returns and platform failures have shaken people. Do you think bond trading will become as big as the stock market for individ- ual investors? We expect bond trading to become bigger than stock trading. People gen- erally make money more consistently with bonds. Once the right levels of awareness are in place, alongside surrounding market infra- structure, then people will be exposed to the benefits. I also think that a strategic shift is coming in the UK stock-trading market. Those stock platforms that partner with WiseAlpha will likely grow market share significantly. Why has it been so difficult for con- sumers to invest in corporate bonds and why should they start now? Until very recently, corporate bonds had typically only been sold to institutional investors or very wealthy individuals at a min- imum price of £100,000, which is obviously prohibitive. A cosy relationship circle of the biggest banks and asset managers dominates the market, with investors being forced to invest in funds to get fixed-income exposure. With WiseAlpha, people now have the option to purchase fractions of bonds for as little as £100. What happened to the London ORB market for corporate bonds? The Orderbook for Retail Bonds market hasn't taken off as one might have liked, after its establishment in 2010. Very few companies now have their bonds listed there and it's not nearly as easy to use or access as WiseAlpha. How can investors use your platform and can you show them which bonds to buy? It's easy to use WiseAlpha. You simply log on and start scrolling through the dozens of companies whose bonds you can invest in. All the tools are there to help you find the right investments within minutes. For those uncertain of picking their own bonds, we have a robo-management tool that ena- bles users to create diversified portfolios that rebalance themselves. What sort of returns can investors expect and how easily can people diversify their portfolio? The bond market has a rich range of risk and return. Corporate bonds can offer interest coupons from 2 per cent for highly rated companies all the way up to 15 per cent for higher risk. Our robo-portfolios currently return between approximately 6 and 8 per cent on a yield-to-maturity basis. Investors can choose how to balance their portfolios based on simple options. Plus, they can fre- quently reassess their choices. The final frontier: a corporate bond market open to everyone The corporate bond market is the only major asset class that has been shut off from everyday investors, and dominated by institutions and the super- wealthy. Minimum purchase sizes of £100,000 or more and a pay-to-play institutional bias are at the root of the problem. However, one fintech is leading the digitalisation of the market, enabling everyone to access the superior returns on offer from this exclusive asset class. he last major financial marketplace to be transformed by technology is the corporate bond market, but a new online trading venue is now providing access to fixed income in affordable sizes. This sudden liberalisation of the main cor- porate bond markets amounts to something of a revolution. While in the UK, 53 per cent of pension investments go into bonds 1 , direct investment by individual investors in corpo- rate bonds remains negligible. The European Commission recently called for the market to be enhanced 2 and, with equity trading becoming more volatile, access to corporate bonds gives investors a means to buy in to those companies with greater security and reliable returns. WiseAlpha, the UK's leading digital bond market, has created a new bond-trad- ing venue to cater for mass engagement. "Corporate bonds have traditionally been traded over the counter, by brokers on the phone, and with incredibly high minimum purchase sizes, meaning only institutional or seriously wealthy investors can play in the market. We are changing that completely," says Rezaah Ahmad, founder and chief exec- utive of the company. The platform offers investors the chance to buy fractions of FTSE 250 size corporate bonds, for as little as £100. Ever since the bond market's inception around 350 years ago, it has largely been closed off from individual investors, so WiseAlpha's radical opening of access is being likened to the digital disrup- tion in the travel industry and the high street. "It's crazy that private investors have been shut out from this market and even insti- tutional trading has remained so old fash- ioned," says Mr Ahmad. "WiseAlpha's digital bond market has transformed access to this multi-trillion asset class, allowing investors of all sizes to tap into the stellar returns on offer. The democratisation of the bond market is in motion and it's time for everyone to get on board." Underlying the new digital market is inno- vative technology that chops up large bond blocks into affordable, bite-sized pieces. "We're scaling by fractionalising bonds and offering them to thousands of inves- tors who buy and sell on the platform," Mr Ahmad explains. To use WiseAlpha's bond market, inves- tors simply sign up and choose from the many corporate bonds available. The range of options is large, with many of the biggest names in UK and European business listed on the platform. At any one time, the top-per- forming household name companies are available to invest in, from Ocado to Virgin Media and Burger King to Vodafone. The platform's development is well timed given the sustained growth in non-finan- cial corporate bond issuance over the past decade and the simultaneous decline in equity listings. According to the Organisation for T Q&A Q A Economic Co-operation and Development, outstanding debt in the form of corporate bonds almost doubled in real terms between 2008 and 2018 3 . Even for long-established listed companies, debt issuance in the form of bonds has become highly popular because of the quick access to money at fixed rates and terms. Prior to the inception of WiseAlpha, sev- eral attempts had been made to establish retail bond markets. In the UK, the most notable of these was the London Stock Exchange's creation of the Orderbook for Retail Bonds (ORB) in 2010. But that bond market has seen low issuance in recent years and many long-established companies have not used it for listings. A Q A Q Q A Q A Q A Q A Q A Q A sterling high-yield corporate bonds 6 sterling investment-grade corporate bonds 4 FTSE 100 index 5 10.4% 6.1% 5.1% The democratisation of the bond market is in motion and it's time for everyone to get on board It's crazy that you can invest easily in Ocado equity but can't easily buy its bonds RE T URNS BE T WEEN 2000 AND 2019 bonds, WiseAlpha also offers a robo-man- agement solution called Robowise that allows users to manage their portfolios automatically, while still being able to tailor portfolio settings and take back control if they wish. Crucially, reselling bonds to other users on the WiseAlpha marketplace is quick 7 . "We're filling the access and liquidity gap, and it will become evermore liquid as thousands of investors continue to join," says Mr Ahmad. The market's straightforward functional- ity is also proving attractive to stock-trad- ing platforms and asset managers. "We are now implementing a wide range of partner- ships with funds, banks, wealth managers, brokers and money apps to allow them to connect into our bond market so they can offer bonds to their customers," adds Mr Ahmad. "We're building a truly open bond ecosystem, bringing together retail and institutional fixed-income investors, and we're hugely excited about continuing to grow the platform." Individual investors of all backgrounds are looking for better returns, to diversify their assets and mitigate risks in a constantly changing environment. Thanks to new technology, they can now access the relia- ble returns of the bond market much more easily than ever before. It is a clear oppor- tunity that private investors are taking up in large numbers. To find out more about how to invest in bonds and grow your money reliably, start- ing today with as little as £100, please visit wisealpha.com We do not offer investment or tax advice. We recommend investors seek professional advice before deciding to invest. As with all investing, your capital is at risk. Liquidity is not guaranteed. Please remember bonds are investments, not deposit protected savings products. This financial promotion has been commissioned by WiseAlpha Technologies Limited, which is authorised and regulated by the Financial Conduct Authority (No 751087). "Private investors" is used in this article to refer to individual investors. 1 Willis Towers Watson,Willis Towers Watson Global Pension Asset Study 2019 (split between government bonds and corporate bonds not given) 2 European Commission, Analysis of European Corporate Bond Markets 3 OECD, Corporate Bonds in a Time of Unconventional Monetary Policy 4 Barclays Sterling Investment Grade Index LC61TRGU Sept 2000 to Sept 2019 5 FTSE 100 Total Return Index TUKXG Sept 2000 to Sept 2019 6 Bank of America Merrill Lynch Sterling High-Yield Index HL00 Sept 2000 to Sept 2019 7 Liquidity is not guaranteed.

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