Shenton Asset Backed Fund

Gas1883 · 28 January 2016 at 12:49AM

Hi forum,

Long user of MSE but first time for me to post on the forum here.

I am posting to get the thoughts of people with some experience in investing outside of standard savings accounts/cash ISAs/fixed term accounts etc.

Today I read about Shenton's 9% 2 year Asset Backed Bond, I can't post a link as this is my first post on here, but it was in the paper today (well Daily Mirror website) and you can google it.

What is the level of risk with this kind of product?
Steer clear or more likely a safe bet?

I had a read of their website etc but couldn't find much out elsewhere, and frankly I am not familiar with anything other than the usual fully covered savings products out there.

I am looking for put a £15-20000 somewhere, and want to avoid the painfully low paying instant access savings accounts out there. The Shenton product above is for 2 years, I could do that comfortably at that rate (9%).

However if I don't apply to them I am probably only able to open up a paragon account for 1 year or there 120 day notice account. Help to buy ISA is already open.

Thanks for reading folks :beer:

dunstonh · 28 January 2016 at 1:17AM

What is the level of risk with this kind of product?

100% loss potential with no FSCS protection. Illiquid. High risk. Whilst the money is secured against property, that is no guarantee of loss not occuring. Just ask any failed property "tycoon".

The yield tends to reflect the risk (crude but generally reliable guide). With base rates so low, why do they need to set the yield at 9% to attract money?

Gas1883 · 28 January 2016 at 2:23AM

dunstonh wrote: »

100% loss potential with no FSCS protection. Illiquid. High risk. Whilst the money is secured against property, that is no guarantee of loss. Just ask any failed property "tycoon".

The yield tends to reflect the risk (crude but generally reliable guide). With base rates so low, why do they need to set the yield at 9% to attract money?

Thanks for the reply.
It does have a too good to be true feel to it.

jimjames · 28 January 2016 at 8:25AM

Gas1883 wrote: »

Thanks for the reply.
It does have a too good to be true feel to it.

Yes. You've got less risk if you invest the money in the stock market

bowlhead99 · 28 January 2016 at 8:30AM

Gas1883 wrote: »

Thanks for the reply.
It does have a too good to be true feel to it.

There are some investment options with high offered returns that are too good to realistically be true: they are scams.

Also, there are some investment options with high offered returns that are completely true and genuine offers but carry high risk. The people that take your money do genuinely invest the money in things which they expect will make them money, and fully intend to repay the loan to you with all the agreed interest, and are not being disingenuous when they say that if they don't have enough money to pay you back, they'll give you potentially-valuable assets, or this other company over here which hopefully will have some valuable assets, has agreed to pay up instead of them.

Their earnest belief that the deal for you to invest is a win-win - because you get interest and they get to use a pile of your cash for their money-making investment opportunity in exchange for a known fixed interest rate... may be commendable and sound great. But none of that means you couldn't lose all your money.

I haven't looked up this deal to see what type it is, but dunstons comments are spot on.

masonic · 28 January 2016 at 8:51AM

This seems to be secured on northern Brazilian property developments. Since you don't have any control or visibility of the security, there is no way to judge the risk levels involved. If they are valuing the security based on the anticipated sale price of the completed development, then clearly an abandoned building site half-way through the project will be worth a fraction of that price.

How good is your knowledge of the Brazilian property market?

bowlhead99 · 28 January 2016 at 9:25AM

You said that if you don't do this deal probably the best alternative for you is the paragon products (which pay about 2%).

As you mentioned being a long time user of the site, I guess you know of the Santander 123 account which would pay 3% on 15-20k, or the various other high interest current accounts that pay more than that but with smaller maximum balances? If so and you're down to only the 2% products left, then really you have exhausted the risk free options.

You can probably get more than 2% for two years by investing through mainstream peer-to-peer lending sites (though the money would start to be returned to you each month and you'd have to keep redeploying it), but that is not without risk either.

If you're using a help to buy ISA then it sounds like saving for a house deposit over the next few years is your goal - so if you don't want the risk of having to defer that goal significantly, then best to stay away from the things that could go wrong. Which means all the things that ostensibly offer nice returns

I have some investment funds that produce income and some bonds and preference shares in individual companies that are yielding 6% or more. But couldn't recommend them to you because they could halve in value if things go wrong and presumably you don't want to lose half your £20k while saving for a house...

Malthusian · 28 January 2016 at 11:02AM

The Mirror article is shocking, even by the low standards of journalists peddling junk minibonds. It does everything it can short of outright illegality to imply that this is just like a cash deposit bond. The closest you get to being warned that you could lose 100% of the capital forever is "The bond is "asset-backed" - so there is some protection - but that doesn't mean it's as safe as in a normal savings account where the first £75,000 is guaranteed." (And a link to an older article about mini-bonds, which no-one will click.)

"That doesn't mean it's as safe" to me means "It could be as safe, it could be slightly less safe", not "ultra-high-risk not remotely safe at all". And I don't read the Mirror.

Why do they flog this utter exclamation marks? What does the Mirror get out of it? How do they get away with it?

bowlhead99 · 28 January 2016 at 12:37PM

Malthusian wrote: »

The Mirror article is shocking, even by the low standards of journalists peddling junk minibonds. It does everything it can short of outright illegality to imply that this is just like a cash deposit bond.

Why do they flog this utter exclamation marks? What does the Mirror get out of it? How do they get away with it?

If you read the whole article, including the conclusion:
"Is it worth it?

There's a clear trade off here – between a lot more interest than a standard savings account and greater risk to your money"

and you also read the link in the middle "read more: what you need to know before lending money to a company" which is not a badly written piece... Then overall you should probably appreciate that it is not a risk free option. One of the clues to put you on alert that it is not a cash deposit bond was in the article's own headline (the last four words of the headline are, "but what's the catch?")

So, someone with an IQ in triple digits and their eyes open s not necessarily going to get screwed. However, with no disrespect to Mirror readers, the readership is not famous for being the most educated or financially savvy, which is why they shouldn't really have unregulated schemes pimped out to them.

The most deficient part was really their " the catch " section - where they basically just said the money wasn't a bank deposit and wasn't instant access -

If you hold them for the full 2 years, you'll get your full cash back plus interest, but if you need to get the money back before then you need to "show financial hardship" or "if an executor of their estate makes a formal request".

Clearly the real catch is that it is risky and they should have only said "if you hold them for the full 2 years, you'll *hopefully* get your full cash back plus interest".

Where all the mirror readers are in danger of being caught out is that " the catch " doesn't sound bad if they're happy to be without the money for the full two years. The real danger, that YOUR CAPITAL IS AT RISK is only sneaked into the concluding section - by which point, some readers will already be salivating and thinking "great, where do I sign!"

dunstonh · 28 January 2016 at 1:13PM

This is an investment. It isnt a retail product. it is like buying a single bond or a single company share.

However, we have seen many media articles compare these 100% loss potential investments with guaranteed cash deposits. Some of these investments are also marketed in a way to make them sound as close to a fixed term deposit as they can get away with.

The investment itself, probably wont go wrong. However, unless its a scam, then no investment company goes into these things expecting for things to go wrong. But some do. And in most cases, the investments that go wrong are the unregulated investments. This is an unregulated investment.

PotentialEnergy · 6 March 2016 at 4:45PM

Be very, very, very cautious and trebly thorough if you seriously want to even consider these bonds. Bear in mind, the state of the Brazilian economy where previous governments are being investigated for corruption. The Real is tumbling on the currency markets as the Brazilian economy slumps. Will property values hold up and even if they did, they'll be worth far less in Sterling terms if the Real continues to fall.

In 2013 IPM sold 'Secured Energy Bonds' offering 6.5% interest. Investors thought the 7.4ish million would be secured against the planned 22 solar installations and the Feed-in-Tariff income would provide the returns. The secured turned out to mean nothing including IPM's role as a Trustee Director. All they did was tell investors in effect "Oh, we're closing the stable door now the horse has bolted". The Director of the Australian firm CBD Energy(Now on the run) transferred over 4.5million to his company; which at the time of selling these bonds was failing to meet interest payments on business loans according to its accounts. There are numerous articles by journalists in the FT, Guardian etc who give a detailed lowdown. One fact that stood out was that 20% of the sum i.e. £1.5million disappeared immediately presumably paying launch costs and commission. Wide berth is the phrase that comes to mind.

If you go to the bottom of the article as per address below, you'll see the remark 'off the richter scale' Why were IPM (Independent Portfolio Managers) even offering these bonds one asks.

3 ws .room151.co.uk/treasury/solar-bonds-the-sunny-side-of-alternative-investments/

Shenton Asset Backed Fund

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