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COVID LOANS BITE
Lenders unwilling to extend or amend
A SPECIAL NICHE
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P2P’s place in private debt
Simple Crowdfunding’s Atuksha Poonwassie on IFISAs and retail money >> 16
ISSUE 86 | OCTOBER 2023
New era for alternatives as investors flock to fixed income ALTERNATIVE debt is set to benefit from the move towards fixed income, as investors fall out of love with volatile equities in a turbulent economic environment. Recent data from Interactive Investor showed that private investor demand for fixed income has hit new highs. The investment platform said that its customer purchases of direct fixed income and corporate bonds combined has grown by 678 per cent over the past 12 months, compared to the previous year. A UK two-year gilt yield was 4.75 per cent on 19 September, up from 4.6 per cent on 30 September 2022, according to MarketWatch data cited by Interactive Investor. Short term fixed income yields are even higher than they were a year ago, and July 2023 saw the platform’s highest monthly spike to date as bond
yields climbed higher. “While the end just might be in sight for UK interest rate rises, for now private investors have been taking advantage of attractive bond yields and locking in an income assuming they intend to hold the bonds to maturity,” said Sam Benstead, bonds specialist at Interactive Investor. While Interactive Investor’s focus is on gilts and corporate bonds, some stakeholders suggest that this trend could
filter into alternative credit strategies. “Something of a seesaw movement between fixed income and equity is quite normal, but I think that many of those discovering alternative lending now will see the benefit of committing a greater portion of their wealth in fixed income for longer periods, even when the see-saw dips back the other way,” said Neil Faulkner, managing director of peer-to-peer lending research and
ratings firm 4th Way. “Fixed income has generally been considered boring and low return, but P2P lending and similar investments have shown highly satisfactory, stable returns – but also with the opportunity to invest in more exciting types of loans too. As a result, less cash will return to equities when the tide changes.” Bruce Davis, founder and joint managing director of ethical crowd bonds platform Abundance Investment, agreed that alternative investments could benefit from this shift. “The rise in interest rates has rekindled interest in longer term investments which pay a fixed income that either compensates for the accompanying inflation increases in prices or which gives a degree of certainty to future income earned from an investment pot,” he said. “Our Community >> 4