News

22nd Sep

‘Buy British and List on the LSE’ - It’s all About the Listing says Mr Bond

As mini-bonds issuer Providence Financial goes bust taking £10m of income seekers hard-earned with it, Retail Bond Expert’s Mr Bond explains the importance of its listing venue when considering a bond as an investment.

As regular readers will know, I have becoming increasingly concerned by the state of the retail bond market and the issues that are being brought to market. So much so I will quote you Mark Twain, "It's not return on my money I'm interested in, it's return of my money".

No sooner had I written this than another mini-bond being issue landed on my desk, this time its 10% per annum; please refer to Mark Twain!

Now I have nothing against mini-bonds per se, after all who wouldn’t buy one issued by John Lewis? However, why would anyone buy an unregulated investment from a company they may have never heard of, which will have no valuations for the term of the investment, and no secondary market?

Furthermore, why do issuers choose this route? It can actually cost more in percentage terms given the modest amount they are raising. Is it to avoid the rules required to list a bond?

I have written several articles on this subject in recent months:

Investors Sweat as Mini-bond Issuer Goes Bust’ – DIY Investor 9th September 2016

Are Some Bond Issues Equities Masquerading as Debt?’ – DIY Investor 1st September 2016

 ‘All Bonds are not Born Equal…….’ 22nd July 2016

In each of these I have highlighted several points, and now I am pointing my (gold) finger at the listing.

First, if it isn’t listed it likely best avoided; period.

Secondly if it is listed, where? The major listing venues within the EU are Luxembourg, Frankfurt, London (LSE), Milan, Paris, and Dublin (Main Market).

Of these for the UK investor I say ‘buy British and list on the LSE’

Why? It’s simple the ‘gold standard’ in Europe for bond investors is the prospectus directive (‘PD’), which is covered in ‘All Bonds are not Born Equal...’ Essentially, it is the highest level of authorisation, and therefore the hardest to attain.

Why do I recommend the London listing? Simple, most of you trade through execution-only venues who, usually, only deal with UK listed securities.

In short, if you are buying a retail bond, look for the listing: if it’s the London Stock Exchange’s Order Book for Retail Bonds (‘ORB’) it’s worth a second look, if not walk on by……………

At this point we can hear the cries, ‘there aren’t any new issues’ and you are right, there hasn’t been one since April.

Because of this I have decided to look at other options for you yield hungry investors, but with the same listing requirements; introducing Preference Shares.

Listed on the main market of the London Stock Exchange, ‘prefs’ are a hybrid between equities and bonds which typically pay a twice yearly fixed dividend – akin to a coupon;  in some cases the  be index linked which guarantees a level of income for the duration of the investment.

RBE’s Miss ‘just call me’ Moneypenny, will be commenting on specific issues in future articles. However, as an entree Moneypenny suggests you refer to the following article first published in August…..

The Quest for Income in a Low-interest Economy: Preference Shares’ – DIY Investor 11th August 2016

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