Discussion
rdjohn said:
It looks interesting, so would be great to hear of other's experience.
How do you feel it compares to a collective bond investment, presumably slightly greater risk, for better return?
Yes I think that's it in a nutshell. I'm aware I'm being reassured by the household names on there which os dangerous as risk is riskHow do you feel it compares to a collective bond investment, presumably slightly greater risk, for better return?
Hmmm. They go to great pains to swerve the clarity. You aren't investing in the corporate bonds they are referring to but buying a mini bond from them. As such, 100% of your capital is at risk for an abnormally low rate of return for the risk that you're taking. As they are minibonds they are in transferable and have no value outside of wisealpha.
And I bet if I was to drill down further and look beyond a few headline corporate bonds the bulk are junk bonds from small/mid caps.
Long/short, as with most mini bonds they woefully under price the risk that is being taken, exploit retail investors desperate for yield but who do not understand the implications and are just an accident waiting to happen.
There is a really good reason why mini bonds are not covered by the FSCS. They are junk and any firm that pays into the scheme flatly refuses to allow them in as they would empty the scheme pot in minutes such is the default rate of them.
Oh, and if MoneyWeek are saying it's ok then it's almost certainly a pile of crap backed by a bunch of usual suspects who probably have well known form in punting penny shares and bamboo to fools.
And the company itself even has a web page dedicated to telling you that their product is OTC junk with no true market, no voting rights, no protection and a good skin of your money for themselves: https://www.wisealpha.com/how-it-works/risk-statem...
And I bet if I was to drill down further and look beyond a few headline corporate bonds the bulk are junk bonds from small/mid caps.
Long/short, as with most mini bonds they woefully under price the risk that is being taken, exploit retail investors desperate for yield but who do not understand the implications and are just an accident waiting to happen.
There is a really good reason why mini bonds are not covered by the FSCS. They are junk and any firm that pays into the scheme flatly refuses to allow them in as they would empty the scheme pot in minutes such is the default rate of them.
Oh, and if MoneyWeek are saying it's ok then it's almost certainly a pile of crap backed by a bunch of usual suspects who probably have well known form in punting penny shares and bamboo to fools.
And the company itself even has a web page dedicated to telling you that their product is OTC junk with no true market, no voting rights, no protection and a good skin of your money for themselves: https://www.wisealpha.com/how-it-works/risk-statem...
Edited by DonkeyApple on Friday 30th December 18:14
DonkeyApple said:
Hmmm. They go to great pains to swerve the clarity. You aren't investing in the corporate bonds they are referring to but buying a mini bond from them. As such, 100% of your capital is at risk for an abnormally low rate of return for the risk that you're taking. As they are minibonds they are in transferable and have no value outside of wisealpha.
And I bet if I was to drill down further and look beyond a few headline corporate bonds the bulk are junk bonds from small/mid caps.
Long/short, as with most mini bonds they woefully under price the risk that is being taken, exploit retail investors desperate for yield but who do not understand the implications and are just an accident waiting to happen.
There is a really good reason why mini bonds are not covered by the FSCS. They are junk and any firm that pays into the scheme flatly refuses to allow them in as they would empty the scheme pot in minutes such is the default rate of them.
Oh, and if MoneyWeek are saying it's ok then it's almost certainly a pile of crap backed by a bunch of usual suspects who probably have well known form in punting penny shares and bamboo to fools.
And the company itself even has a web page dedicated to telling you that their product is OTC junk with no true market, no voting rights, no protection and a good skin of your money for themselves: https://www.wisealpha.com/how-it-works/risk-statem...
So...that's a "no" then?And I bet if I was to drill down further and look beyond a few headline corporate bonds the bulk are junk bonds from small/mid caps.
Long/short, as with most mini bonds they woefully under price the risk that is being taken, exploit retail investors desperate for yield but who do not understand the implications and are just an accident waiting to happen.
There is a really good reason why mini bonds are not covered by the FSCS. They are junk and any firm that pays into the scheme flatly refuses to allow them in as they would empty the scheme pot in minutes such is the default rate of them.
Oh, and if MoneyWeek are saying it's ok then it's almost certainly a pile of crap backed by a bunch of usual suspects who probably have well known form in punting penny shares and bamboo to fools.
And the company itself even has a web page dedicated to telling you that their product is OTC junk with no true market, no voting rights, no protection and a good skin of your money for themselves: https://www.wisealpha.com/how-it-works/risk-statem...
Edited by DonkeyApple on Friday 30th December 18:14
davepoth said:
So...that's a "no" then?
Certainly not something to throw more than 0.01% of your disposable wealth at All these mini bond schemes that are springing up are doing so due to such low interest rates on low risk investments and a desperate need for so many to get a higher rate of return. What they do is sell junk debt that institutions would either not touch or price the required return well into double digits plus insist on security at a manifestly wrong rate of return and with no security, control or even clear route to exit to the retail market via a wrapper that adds even more risk by having no compensation cover, no secondary market and no rights or control at all.
DonkeyApple said:
Certainly not something to throw more than 0.01% of your disposable wealth at
All these mini bond schemes that are springing up are doing so due to such low interest rates on low risk investments and a desperate need for so many to get a higher rate of return. What they do is sell junk debt that institutions would either not touch or price the required return well into double digits plus insist on security at a manifestly wrong rate of return and with no security, control or even clear route to exit to the retail market via a wrapper that adds even more risk by having no compensation cover, no secondary market and no rights or control at all.
How is it that a 'The AA' bond could be junk as such?All these mini bond schemes that are springing up are doing so due to such low interest rates on low risk investments and a desperate need for so many to get a higher rate of return. What they do is sell junk debt that institutions would either not touch or price the required return well into double digits plus insist on security at a manifestly wrong rate of return and with no security, control or even clear route to exit to the retail market via a wrapper that adds even more risk by having no compensation cover, no secondary market and no rights or control at all.
TooLateForAName said:
klmhcp said:
How is it that a 'The AA' bond could be junk as such?
It isn;t an AA bond. Its a wisealpha bondklmhcp said:
Yes I know but it is based on borrowing by the AA. I'm interested in how they can be junk - could they easily default on that? If so, what are the repercussions?
You aren't lending money to the AA, you're lending money to Wisealpha, who will use some of your money to lend money to the AA. So on top of the risk of non-payment by the AA, you also have the risk of non-payment by Wisealpha. I can't find a credit report for them, but I think it's probably safe to say they won't be AAA rated, which means you would be looking at an overall rating for this bond somewhere below the BBB-, and anything below BBB- is considered to be a junk bond.
https://en.wikipedia.org/wiki/Bond_credit_rating
It's not a step change into disaster, but the point is that institutional investors would think this to be too much of a risk to invest in. The added problem is that rather than owning an AA bond which could be sold on the open market (even if it was only for pennies on the pound) you have a direct investment with Wisealpha which can only be sold back to Wisealpha in effect.
davepoth said:
You aren't lending money to the AA, you're lending money to Wisealpha, who will use some of your money to lend money to the AA.
So on top of the risk of non-payment by the AA, you also have the risk of non-payment by Wisealpha. I can't find a credit report for them, but I think it's probably safe to say they won't be AAA rated, which means you would be looking at an overall rating for this bond somewhere below the BBB-, and anything below BBB- is considered to be a junk bond.
https://en.wikipedia.org/wiki/Bond_credit_rating
It's not a step change into disaster, but the point is that institutional investors would think this to be too much of a risk to invest in. The added problem is that rather than owning an AA bond which could be sold on the open market (even if it was only for pennies on the pound) you have a direct investment with Wisealpha which can only be sold back to Wisealpha in effect.
Plenty of Institurional investors will invest in high yield bonds, but they will be using a specialist asset manager with expertise in this asset class who is actively managing these positions and managing risk accordingly.So on top of the risk of non-payment by the AA, you also have the risk of non-payment by Wisealpha. I can't find a credit report for them, but I think it's probably safe to say they won't be AAA rated, which means you would be looking at an overall rating for this bond somewhere below the BBB-, and anything below BBB- is considered to be a junk bond.
https://en.wikipedia.org/wiki/Bond_credit_rating
It's not a step change into disaster, but the point is that institutional investors would think this to be too much of a risk to invest in. The added problem is that rather than owning an AA bond which could be sold on the open market (even if it was only for pennies on the pound) you have a direct investment with Wisealpha which can only be sold back to Wisealpha in effect.
With Wisealpha you are doing neither of these things.
davepoth said:
klmhcp said:
Yes I know but it is based on borrowing by the AA. I'm interested in how they can be junk - could they easily default on that? If so, what are the repercussions?
You aren't lending money to the AA, you're lending money to Wisealpha, who will use some of your money to lend money to the AA. So on top of the risk of non-payment by the AA, you also have the risk of non-payment by Wisealpha. I can't find a credit report for them, but I think it's probably safe to say they won't be AAA rated, which means you would be looking at an overall rating for this bond somewhere below the BBB-, and anything below BBB- is considered to be a junk bond.
https://en.wikipedia.org/wiki/Bond_credit_rating
It's not a step change into disaster, but the point is that institutional investors would think this to be too much of a risk to invest in. The added problem is that rather than owning an AA bond which could be sold on the open market (even if it was only for pennies on the pound) you have a direct investment with Wisealpha which can only be sold back to Wisealpha in effect.
klmhcp said:
Thanks, makes sense!
Yup. The key here with this product is that they want people to think just as you are that it is a clean route to market for reasonable quality corporate bonds. But the reality is that it is nothing of the sort. They are selling an over the counter certificate (OTC) via a wrapper called a minibond that has almost no protection. And the fact that it is an OTC means they may not even be hedging with the underlying that you are believing you're exposed to. Your OTC contract will state that you get a share of the yield published by the corporate bond and that the capital value will replicate the value of the corporate bond but that doesn't mean they've bought that corporate bond. In simpler terms it's a CFD with a massive annual fee, no rights, no protections, apparently a shave on the yield by the looks of it and for all anyone knows they could be punting your cash on completely different products for their personal gain with no downside of it goes wrong. I.e their OTC contract with you is just a piece of paper that says it will mimmick a particular corporate bond, let's say something that yields 3%. There's absolutely no reason why they have to buy that bond, it would be smarter for them to buy a different bond that yields 5%, gear it up 2-3 times and pocket the difference between what they make out of your money and what they've agreed to pay you should it not implode. The fact is that you have absolutely no true idea what they will be doing but thebone thing you do know is that you have no link to the real corporate bond.
http://p2pindependentforum.com/thread/3608/wisealp...
This is another forum where someone from Wisealpha has posted responses to specific questions. A lot of interest was generated from a Telegraph article in 2015 - page 1.
The very limited number of offerings seems to be a constant concern as well as their 1% fee.
This is another forum where someone from Wisealpha has posted responses to specific questions. A lot of interest was generated from a Telegraph article in 2015 - page 1.
The very limited number of offerings seems to be a constant concern as well as their 1% fee.
rdjohn said:
http://p2pindependentforum.com/thread/3608/wisealp...
This is another forum where someone from Wisealpha has posted responses to specific questions. A lot of interest was generated from a Telegraph article in 2015 - page 1.
The very limited number of offerings seems to be a constant concern as well as their 1% fee.
Only 10 issues and long-term only 20-30??This is another forum where someone from Wisealpha has posted responses to specific questions. A lot of interest was generated from a Telegraph article in 2015 - page 1.
The very limited number of offerings seems to be a constant concern as well as their 1% fee.
A credible fixed income manager would want 70+ issuers for diversification and risk management.
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