Secured Bonds 9%pa

IanMenage

Westway "Government Secured Bonds 9%pa" - how do I assess the risk, as there is no compensation scheme recourse?

chockydavid1983

The clue is in your question- VERY risky :-)

TrustyOven

Sigh.
Another 9% bond thread

Don't you think that if the FTSE (one of the indicies) yields about 4.5%, you are taking on much more risk than stockmarket risk?
And a heck of a lot more risk than cash deposits?

(yeah ok different kinds of risk, but it just goes to show)

dunstonh

Really easy. This is extremely high risk. Higher than a UK equity fund.

It is not a secure investment despite what marketing name it calls itself.

bowlhead99

A slightly less dismissive answer than the others but same result...

IanMenage wrote: »

Westway "Government Secured Bonds 9%pa" - how do I assess the risk, as there is no compensation scheme recourse?

You assess it the same basic way as with any privately offered investment opportunity.

1) Become an expert investment professional or hire one for a few tens of thousands of pounds;
2) evaluate the business model by getting hold of all the books and financial records, material contracts and plans etc;
3) meet with the directors personally and ask them incisive questions and follow up the answers for independent verification;
4) evaluate all the commercial, regulatory, economic and tax risks through your knowledge of law and sector-specific regulation and a deep understanding of comparable business models in the sector, reviewing the prospective upside potential against the possible risks and losses;
5) read everything you can about rival businesses in the sector and attempt to figure out how likely it is that they'll achieve good enough deal flow to efficiently deploy the cash you lent them at a low enough risk for you to get it back;
6) kick the tyres on all their previous projects and see what falls down, and attempt to use your research, expertise and judgement to assess how likely they are to deliver the 100% of capital and promised 9% a year rather than losing the 100% of capital and the hoped-for 9%
7) misc other which I can't be bothered brainstorming and typing. But basically a lot more work than it can possibly be worth doing on a few thousand pounds investment.

On top of this ensure you have read the small print which mentions the information on their website is only to be issued under FCA rules to sophisticated or high net worth investors who are professional clients or eligible counterparties and will sign away their rights to the more useful FCA protections by saying they know what they are getting into. If you were a Sophisticated Investor you would know what the qualification for that is; for example directors of high turnover companies could qualify, as could business angel investors and private equity sector employees ; likewise if you have a six figure salary you might be able to go the HNW route. It's not the sort of opportunity that the FCA would accept should be put anywhere near a "normal" investor who only usually deals with mainstream investing products and bank deposits


The major shortcut to all the above is to realise that if something is marketed as "Government Secured something something anything" and does not in fact have a Government guarantee where the Treasury will directly insure your personal losses, then they are basically trying to mislead anyone who doesn't know better ; the victim might be an idiot who doesn't know what he is signing, or a poor little old lady getting bamboozled into thinking that their invested money is safe as houses because of a nice headline. A real "professional" or "sophisticated" investor would run a mile to avoid the associated reputational risk of becoming involved with a business partner who touts for business using headlines about the government supporting a private unregulated non-transferable mini bond such as this.

In this case it is the old chestnut of saying up front it is a "Government supported secure housing bond" and then the next line down they clarify that that just mean this type of housing sector generally is supported by some sort of government subsidy and the govt are not directly supporting you as a bondholder nor guaranteeing this bond. That bait-and-switch should mark it out as "misleading at best" and so even if you were the type of educated and experienced investment professional carrying out the due diligence I mentioned in my opening paragraphs, that type of aggressive marketing probably de-legitimises any of the positives you found in your research.


Effectively, the govt is merely "supporting" the sector with some sort of grant or loan or partial income guarantee (like they support the sector in renewable energy or any number of similar high risk mini bonds); the govt support means that it is only very very risky instead of super duper monstrously risky for firms operating with it, and they would like to try out those very very risky markets using your money instead of theirs, taking the upside potential for themselves while only offering you a paltry 9% in exchange for the easy 100% loss potential.

IMHO, of course: avoid

jimjames

IanMenage wrote: »

Westway "Government Secured Bonds 9%pa" - how do I assess the risk, as there is no compensation scheme recourse?

If a stranger in the street asked you to invest with them in a guaranteed investment and there was no compensation scheme, how would you assess that risk?

bostonerimus

Are these high return bond posts real questions or just surrogates for these [strike]scams[/strike] schemes. I get suspicious when the authors have just one or two posts.

Of course the answer is always the same..... today you'll only get high return with high risk. Sometimes that's legitimate as it's in regulated funds, stocks, bonds etc that you can buy and sell on major markets. These unregulated high return bond schemes obviously don't fall into that category and should be avoided.

dunstonh

Are these high return bond posts real questions or just surrogates for these scams schemes. I get suspicious when the authors have just one or two posts.

Probably a mixture of both. Are we allowed to be sceptical about that sort of thing anymore?

DrSyn

Simple

FTSE 100 yields about 4% and that is a risk investment with 100 companies, not just one.

So anything that yields 9% is a very high risk investment, whatever name they like to call it!

Vortigern

What this forum needs is a sub-board under Savings & Investments called:

Extremely Risky Investments Promoted by Newbies

so a board guide could move these posts off the main board.

AnotherJoe

bowlhead99 wrote: »

It's not the sort of opportunity that the FCA would accept should be put anywhere near a "normal" investor who only usually deals with mainstream investing products and bank deposits

Well, you can say that but they don’t follow up by ensuring these type of things are not (a) seemingly aimed at the mass market by being advertised in places where it’s mostiy the general public reading them, and (b) phrased in a manner where the adverts are treading close to (and I’d say overstepping) the line between truth and being out and out lies regard8ng guarantees.

I think the FCA don’t give a hoot about these type of bonds and are content to let them prey on unsuspecting investors who see the words “bond” “guaranteed” and “any number around 8%” and draw innapropriate conclusions.