England 24/05/2013 – Despite the retail bond market being quite crowded it looks like the boom going to continue, at least for the foreseeable future.
The fact that investing in retail bonds is continuing to grow in popularity means that there is still room for more retailers to raise money by issuing bonds. The current economic climate has created something of a perfect storm for this interesting financial product. Retail bonds offer that increasingly rare win – win opportunity for both investors and the firms offering the bonds.
Investors need an investment vehicle that delivers a reasonable rate of return. However, it has become increasingly difficult to make money from investments. Interest rates from banks and building societies are not even high enough to cover the rate of inflation, let alone give investors a return. Even investors who have bought shares in blue chip companies have seen returns falling away. Many have even lost money on their blue-chip shares. Naturally when they see a chance to invest in well-established firms that they know and get returns of 6% to 12%, sometimes more, they invest.
On the other side of the story, firms need to raise cash. However, doing it through normal channels is proving more and more difficult. Even large firms are having to jump through a lot of hoops, and the whole approval process takes much longer than it once did. For a firm that is trying to compete in today’s ever more competitive environment not getting the cash they need to take advantage of new opportunities is not viable. Setting up a bond takes time, but finding people to invest is rarely a problem, so firms can get the money they need relatively quickly.
Mini-bonds are helping to expand the market
Retail Bond Expert has seen interest in retail bonds increase, rapidly. They expect this to continue and to see more firms raising cash in this way. The fact it is now possible to launch a mini-bond means that smaller firms can now raise money via bonds. The Jockey Club recently launched one, and Nuffield Health has just brought its first mini-bond to market.
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