Coop Development bonds - are they a good bet?

Robinsroost

Hi there, I am looking to invest £10K of my matured ISA and wondered where to go?

The Coop do good rates for savings on their development bonds - 2.75% for 1 year rising to 3.5 for 3 years.

are they worth a punt?

Thanks

dunstonh

Are you looking at savings or investments?

You really havent given us anything to go on. So, we need more info.

Ken68

https://www.midcounties.coop/Membership/Development-Share-Bonds/


Maybe this.

Malthusian

A pretty underwhelming rate given the bond has a risk of losing 100% of your money if the mid-Counties Co-op goes under. At least it isn't some fly-by-night property development firm like most of the mini-bond threads, but it's still a corporate bond with a risk of total loss and not a deposit covered by the Financial Services Compensation Scheme.

The Co-op must think that everyone views them as a safe bet if they're offering 2.75% for something that can lose 100% of your money, personally given what we know about their corporate governance post Paul Flowers, I would disagree.

bowlhead99

Yes Ken I think that'd likely to be what the OP is talking about - the interest rates quoted are about right.

In that case, to the question:

The Coop do good rates for savings on their development bonds

That is incorrect. These are not rates offered for savings. With savings you deposit an amount and you get it back fully insured (FSCS protection) with interest. Instead, what is being looked at is an investment opportunity which offers chance of a 2.75% return with risk of 100% loss of capital.

Per the FAQ:

How safe is my investment?
To find out about the Society’s financial position please view our most recent Annual Report and Accounts on the link below.

http://www.midcounties.coop/About-Us/Reports-Accounts

Please also note that the position you occupy as a shareholder of the Society is no different from that of a shareholder in any other corporate body in so far as, if the Society fails, you may not have all or any of your investment returned to you. Co-operative societies, unlike banks and building societies, are not subject to prudential supervision by the Financial Services Authority. Development Share Bonds are not covered by the Financial Compensation Scheme.

So, if you are confident at evaluating financial statements and predicting a firm's solvency in the hope of getting a 2-3% return, and the opportunity fits neatly into a gap in your investment portfolio, go ahead.

For £10k you can stick it in bank current accounts for 3%+. If you had £100k you would run out of high paying current accounts and could consider this as a small part of your bonds piece within a broad investment portfolio, if you fully understand the risk.

Ken68

Thanks Robin...interesting, compares with Santander 123 without all the faffing about.

bigadaj

Ken68 wrote: »

Thanks Robin...interesting, compares with Santander 123 without all the faffing about.

Except that it doesn't compare with Santander 123 or any other fscs protected account.

Apart from that very similar.

Ken68

Good point, Big....have £4k maturing in the next fortnight, destined for Santander but having a re-think now.

Malthusian

Ken68 wrote: »

Good point, Big....have £4k maturing in the next fortnight, destined for Santander but having a re-think now.

You were going to put this £4k into a no-risk FSCS-protected deposit account, but you've now decided you do want to take risks with the money, and you've settled on a single corporate bond with a risk of 100% loss and a pretty uninspiring yield? Without considering anything in between?

bowlhead99

Ken68 wrote: »

Good point, Big....have £4k maturing in the next fortnight, destined for Santander but having a re-think now.

You're kidding right?

You would buy a £4k investment in a co-op conglomerate which has a 1% operating profit margin, putting 100% of your capital at risk, for a chance of a return which is capped below that of the best zero risk current accounts. And unlike some other investments, only has downside potential with no chance of outperforming the rates that they quote?

Not sure if you're being sarcastic or !!!!!!

Ken68

You could be right Bowhead, will wait and see.
But I do see that the rate is fixed for the term.
Would they be allowed to default?