6% Sainsbury's bank Fixed Rate bond Atlantic Capital Management

harsh_but_fair

And to anybody else reading this post in the future stop using Google / Facebook / Instagram or whatever to make investment decisions !!!!!!.

bowlhead99

aroominyork said:

However, it does look like the bond is selling around par (100.31 when I posted this) https://markets.businessinsider.com/bonds/sainsburys_bank_plcls-flr_nts_201722-27-bond-2027-xs1721760624

Ah you are right. The bond is not issued by Sainsbury's plc but  by Sainsburys Bank, and it's a callable bond so you aren't guaranteed to get coupon payments through to the 2027 maturity; they can simply pay it off (or reset the interest rate) in 2022; so in this case nobody is going to pay 140p for it because that would give them a huge guaranteed loss if it were settled for 100p after only two years of interest payments. 

As the Sainsbury's banking entity could go bust and default on their subordinated liabilities due to a bad outlook for small UK banks at the moment, and they might not want to pay it off in 2022 on the call date even if they can afford to do so - and may instead keep an investor waiting for their cash for another five years after that (giving them even more time in which they could go bust and default while you're waiting for it to mature) - investors really do want an approx 6% effective yield on it for the risk and uncertainty they are taking.

So it goes back to the comments from Dunstonh and I made above where the outcomes are either that:

- the intermediary is trying to get your cash and run off with it as an outright scam, or

- take a commission on selling you an unregulated investment in a fixed rate loan note which is not at all guaranteed to pay you the headline rate (because they might just go bust instead or reset the interest rate after 2022), while you gullibly hand over your life savings and willingly pay the commission because you think it is a great deal, rather than recognising that what the salesman describes is too good to be true.

Aretnap

The only "investments" which can reasonably be called 100% safe are:

(1) FSCS protected bank accounts, you can find a list of the best ones here.The best available interest rate is 1% if you want instant access or 1.4% if you fix for 5 years

(2) National Savings and Investments; which will give an interest rate of 1.16% easy access and

(3) UK Government bonds, provided you intend to hold them to maturity - their value can still go up or down between now and the maturity date. You can get an effective interest rate of -0.08% for 2 years this way, or a whopping 0.62% if you don't mind tying your money up for 30 years.

All of these are backed (directly or indirectly) by the UK government, so barring a nuclear war, a communist revolution or a plague significantly worse than COVID-19, you can be sure of getting your (dad's) money back. However it is currently impossible to get a higher return than those listed above without taking at least some risk of losing capital.

Which is a roundabout way of saying that if the salesman is telling you that he can get you a 6% return which is "100% safe", he is lying to you. Not stretching the truth, not putting the best gloss on things in a normal marketing sort of way, but flat out telling you something that is demonstrably not true. That should really be all you need to know - if he's lying about that, he's probably lying about plenty of other things as well. There are some hard and fast rules in life, and "don't give £20K to people who you know are lying to you" is one of them.

tommyedinburgh

I bet the OP is absolutely delighted that they came on here. Holy moly, £20k. 

John_

If the money really was going to go into the bond then the risk is not ridiculous, but then the yield to call is not very much either.

dunstonh

John_ said:

If the money really was going to go into the bond then the risk is not ridiculous, but then the yield to call is not very much either.

It wont be going in the bond.  Its a known scam method to use the details of real bonds with near future maturity dates and high coupons to scam low knowledge consumers into passing money to the cold caller.  The money is and cold caller vanish not long after.

Aretnap

The name "Atlantic Capital Management" seems to be historically popular with scammers - a quick Google brings up warnings from regulators in the UK and Belgium.

The UK registered company of that name appears to be a dormant company as of last summer with no assets, liabilities of £2774, and an overdue confirmation statement. That doesn't look particularly legitimate to me, to put it mildly.

In summary, don't. Just don't.

aroominyork

The fact that these scammers are successful is partly due to the dual use of the word 'bond'. It can mean a loan to a company where 100% of your capital is at risk, as with this Sainsbury's Bank 6% product; and is also used for savings products, eg a two year fixed term bond paying 1.2%, where there is no risk if within FSCS limits or via NS&I. For as long as 'bond' has both these meanings, the job of the scammers is made easier.

colsten

Reddogwoman said:

I'm thinking of investing in this bond through Atlantic Capital Management but have never used this kind of investment before. They tell me it's 100% safe, but they would say that wouldn't they? I checked them out on companies house and they appear legit, but this is a whole new thing for me. I'm trying to find a suitable investment for my Dad to put a £20,000 sum which is currently in an ISA and due to mature in the next couple of months. Has anyone had experience of this company or this bond? They say there are no management fees and just a £12 early withdrawal fee subject to 30 days notice. Seems a bit too good to be true so a little concerned about investing but it also seems like a good way to invest money he's happy to put away for 1-2 years. I'd be really grateful for any comments/ advice please. Thanks

Let's hope @Reddogwoman will be back to see the warnings.

bowlhead99

aroominyork said:

The fact that these scammers are successful is partly due to the dual use of the word 'bond'. It can mean a loan to a company where 100% of your capital is at risk, as with this Sainsbury's Bank 6% product; and is also used for savings products, eg a two year fixed term bond paying 1.2%, where there is no risk if within FSCS limits or via NS&I. For as long as 'bond' has both these meanings, the job of the scammers is made easier.

Unfortunately nobody is going to go away from using the term 'bond' for all this stuff as it's simply how language has evolved. 

In a diamond, each carbon atom bonds to four other carbon atoms, sharing electrons and forming something tough and solid. A strong 'bond' between people or groups can come from a shared connection - 'he bonded with his son'. Bonds can be feelings, duties or customs that force you to behave in a particular way: 'bonds of tradition', 'break free from the bonds of convention' etc. People are probably familar with the phrase 'my word is my bond' which the London Stock Exchange had as its motto (dictum meum pactum) since it was established in the sixteenth century. There it meant that if I say we have a deal, we have a deal, and you can trust it. 

So, if you take the LSE motto where we are striking a trustworthy deal, when Sainsburys Bank is fundraising in the capital markets to provide finance to their business they may issue a fixed rate callable resettable loan note, and participants in the market for tradeable financial instruments may call the £1000 denominations of this financial instruments, 'bonds'. They are a promise that the bank will take your money now and give it you back with interest. As an investor, you hold their bond.

This does not mean you will definitely get your money back, because they may run into financial difficulties and not be able to make good their promise, but you do have a promise. And you know at least that if the bank is liquidated you'll get your money back before the equity owners of the bank get anything - although it will be after the bank has paid off certain other lenders, creditors, employees etc, and the exact terms of where you sit in the pecking order will be something you can find out from evaluating the prospectus and news releases and all the other information available about their other financial instruments.

In that context, it doesn't seem illegitmate for the many trillions of dollars of finance provided by fixed income investors around the world to be called 'bonds'. Such things have been known as 'bonds' for centuries.

Quite separately, a  bank or building society or NS&I (or overseas equivalent) has customers wishing to deposit their money into financial products to preserve their value for a rainy day, and willing to lock their money up for a fixed amount of time, and may offer what is known as a savings bond. (https://www.moneyadviceservice.org.uk/en/articles/cash-savings-bonds)  Effectively, this is also a loan to a financial institution, and (subject to regulations on liquidity and capital adequacy for regulated financial institutions), the bank can do what it wants with the money, and hopefully will be able to pay you back. In that sense it is similar to the 'fixed rate loan note' bond that they issued onto the financial markets, except you can't sell it to someone else, and just have to wait to get your money back in due course.

But they are offering it as a deposit product, a regulated banking service, rather than 'invest at your own risk as a sophisticated and well-informed investor'. That means it comes with consumer protection and a compensation scheme, so your money isn't really 'at risk' other than the hassle factor of needing to claim compensation if the bank goes titsup.

The government is not going to start telling the banks that they can't call these deposit products 'savings bonds', because they are quite literally a savings product with a fixed term and certainty of getting your money back, and common parlance of 'bond' (bond of trust, bond of understanding between father and son, bond of carbon atoms etc, security bond when renting property) makes it reasonable to use the term 'bond' when making a fixed term financial agreement.  And any consumer reading the advertising material to find out what the 'savings bond'  or 'fixed term bond' is, is going to know that they are putting their money on deposit and can get it back at the end of the term (and otherwise in accordance with the terms and conditions or regulations) and will have recourse to a compensation scheme which banks have to tell people about.

So, nobody is going to create laws to say that banks and building societies and NS&I and US Treasury etc must stop using the word 'bond' in the names of their consumer-facing financial products. And nobody is going to create laws or guideline that the $100+ trillion of fixed interest loan instruments around the world can't be called bonds any more. 

Just for fun, an 'investment bond' in HMRC terminology is a tax-advantaged wrapper offered by an insurance company which can safely hold other financial products such as investment funds...