Category Archives for "Buy Bonds"
Here are the prospectus and headline details for TalkTalk Bond Issue with a maturity of 20 February 2025.
TalkTalk Bond Prospectus: ⬇️ Download
This TalkTalk corporate bond is available to buy from: WiseAlpha (minimum purchase size £100)
When it comes to corporate bonds, today, most private investors use an online trading platform. It goes without saying that one of the key factors influencing your choice of platform will be the associated costs. After all, the lower your fees, the more of your hard-earned money you’ll be able to invest. So, how do the WiseAlpha fees compare with that of others?
With so many platforms and types of pricing models available, finding the right one for your needs can be confusing. Here, we’ve selected five of the best low-cost platforms for trading corporate bonds and examined each in more detail to look at their pricing structure and what you actually get for your money. As we’ll see, low fees don’t always mean the best value.
|Platform||Regular charges||Dealing costs||Other fees||Notes|
|Hargreaves Lansdown||£9.99 to £19.99 per month||£11.95 per deal for up to 9 deals per month||Further charges applied to overseas trading||An annual charge of 0.45% for holding bonds in an ISA|
|IG||Quarterly custody fee of £24 (fewer than three trades per quarter)||£3 to £8 per deal||A minimum charge of £40 for telephone trading||Custody fee can be reduced with regular trading|
|Interactive Investor||Three monthly plans ranging from £9.99 to £19.99||£3.99 to £7.99 depending on plan||£49 fee for telephone trades||Additional fees for trades over £100,000|
|Degiro||None||£1,75 per trade & 0.014% (to a max of £5)||Telephone fee of €10 plus 0.1% per order||Low cost, but limited research tools|
|WiseAlpha||0.25% – 1% annually (tiered)||None||0.25% early sales fee||No admin or custody feed|
Pricing structures clearly vary significantly. In all of these instances, we’ve chosen platforms that don’t charge set-up fees, but those that do often charge less in other areas such as a monthly, quarterly or annual maintenance/admin charge.
When charged, this fixed charge typically comes as a set fee or a percentage of the value of your holdings. Obviously, for some investors, a flat fee could be preferable to a percentage, especially if you have a large amount of money to invest. However… fees aren’t the only factor to look at when comparing costs.
Sometimes the cheapest platform won’t offer the best value for your circumstances. Some platforms are more generic when it comes to the investments that they offer, while others have a limited selection of bonds. If you’re just starting out in corporate bonds, then you’ll want some educational tools and materials to help you get started.
Let’s look in more detail at the pros and cons of each, so you can make your own mind up as to which is might be best for your individual needs.
Established since 1981, Hargreaves Lansdown has plenty of guides and market analysis for would-be investors in corporate bonds, along with a handy mobile app. However, you will pay for all of this.
Prices start at £5.95 if you make more than 20 trades per month, but double to £11.95 if you make nine or fewer trades each month, making it one of the more expensive platforms on our list, especially compared to Degiro, IG and WiseAlpha.
Beyond that, the fee structure isn’t particularly clear on the site. And some bonds can only be traded over the phone – attracting further charges.
IG offers a clear pricing structure with competitive commissions of between £3.00 and £8.00 per deal. Additionally, the user-friendly app comes with some useful analysis/trading tools. There’s also a forum where you can share information and tips with fellow traders.
However, IG has a distinct focus on spread betting and there are no research features for those interested in trading bonds. It’s worth noting that IG has charges a quarterly fee of £24 unless you make three trades in that period, so those not looking to trade regularly might be advised to look elsewhere.
With three tiers of fixed fees, Interactive Investor claims to be the best value on the market, and it is true that offering a choice of plans based on your trading needs will be attractive to certain investor types. That said, the most popular plan seems to be the entry-level £9.99 monthly fixed fee offering a single free trade.
However, you’ll have to pay an additional £7.99 for each subsequent trade in that month. Training resources are somewhat limited, so Interactive Investor probably isn’t ideal for beginners.
The cost of trading on DEGIRO is significantly lower than many of its competitors, at just £1.75 per deal, plus 0.014% per trade (up to a maximum £5). While that sounds excellent, but you get what you pay for and there are a number of downsides: DEGIRO isn’t up to the mark when it comes to research and analysis features, or educational tools; you can’t use a debit or credit card to deposit funds and withdrawals can only be made by bank transfer.
Furthermore, the availability of bonds is somewhat limited. Add to that less than glowing customer service reviews on TrustPilot, and you start to see why perhaps those fees are so low.
WiseAlpha fees, while not as cheap as DEGIRO, come with perhaps the clearest and most transparent charging structure. The tiered structure means investors pay 1% on the first £20,000, 0.75% from £20,000 to £50,000, 0.5% on £50,000 to £100,000 and just 0.25% on amounts over that. And that’s it.
There are no other buying fees at all. If you want to sell your bonds before the end of their term, though, there is a flat 0.25% fee which is applied to the principal amount. But, perhaps more importantly, because the platform has a strong focus on the corporate bond markets, investors get a great selection of bonds to choose from and a wealth of information in order to make informed decisions.
As we can see from this selection of low-cost platforms, price isn’t necessarily the overriding consideration when it comes to choosing a trading platform for corporate bonds. Most experienced investors will opt for a platform like WiseAlpha that I believe offers a good balance of choice, features and tools, as well as a competitive pricing structure.
If you’re considering buying corporate bonds, it’s important to understand what exactly that entails and the best ways of trading in bonds in order to secure the best returns and minimise risk. The following is a beginner’s guide to purchasing corporate bonds, including what types of bond are on offer, what to look out for, and, importantly, where to trade.
Corporate bonds are a way of lending money to businesses, and other organisations, looking for funding. At its most simple, a corporate bond is an IOU for money lent to a company in return for an agreed number of interest payments (normally a fixed percentage of the price of the bond). The company must then repay the capital at maturity – after a set period.
It’s important to understand, however, while corporate bonds generate income, they do not offer capital growth if they are held to maturity (although as we’ll see later the repayment at the end of the term can be higher, or lower, than the initial investment).
While corporate bonds and gilts (fixed issue securities issued by the British government) are very similar, corporate bonds are by definition a riskier option as businesses are much more likely to go under, or default, than the government. However, to reflect this risk, they offer a higher rate of return.
Unlike shares, corporate bonds do not give you a stake in the company. Instead, you are a creditor. However, you are prioritised above shareholders should the company fail. Just be aware that you may not get your full investment back – unlike shareholders who, in the event of the company going under, will lose everything.
Most corporate bonds are traded on a secondary market (i.e., you don’t have to hold them to maturity) but their value can fluctuate based on interest rates and the solvency of the issuer. The price of a bond can also be affected by the general economic environment and broader market conditions.
For instance, if there’s a bull stock market, then investors may reduce their exposure to bonds and divert that cash into shares. Conversely, if the stock markets take a hit, investors will flee to the relative security of the bond markets.
Bond prices typically rise when interest rates decline. Corporate bonds will offer more attractive rates of interest than banks can on deposits. When trading above or below their nominal value, they are defined as trading ‘above par’ and ‘below par’, respectively. This affects yield, as well as the repayment value received at the end of the term versus when you purchased.
This can be demonstrated by looking at an example:
If a corporate bond has a nominal value of £100, but you buy it for less, say £90, you’ll make a capital gain of £10 for each bond when it matures. Likewise, the amount of interest you receive will also be affected by the price you paid for the bond, as interest is paid based on the nominal value, not the second-hand market price.
In effect, in this example, you would get more bang for your buck. The official term is ‘redemption yield’. This is the actual rate of return based on combining the interest rate paid for the bond and the profit (or loss) achieved when holding the bond to maturity.
Here’s a simple calculator that will show you the current yield (actual interest returned) on a corporate bond that has a current price that is different from its par value/original issue price:
Like many investment vehicles, corporate bonds are given ratings by the likes of Moody’s and Standard & Poor’s. Those rated AAA to BBB are considered ‘investment grade’. These are lower risk bonds featuring stable, financially sound, performing businesses, such as well-established utility companies and major supermarket chains.
On the other hand, ‘high yield’ bonds, also known as ‘junk bonds’ are a riskier type of corporate bond issued by companies that have a higher chance of defaulting (rated Ba1/BB+ or lower, by Moody’s/S&P). Consequently, though, these do attract a higher rate of interest.
The credit quality of a bond issuer is crucially significant for bonds. If a bond is downgraded, then the market will react unfavourably and the value of your investment could drop significantly (of course, if the opposite happens and the bond is upgraded, the value will increase).
Although this shouldn’t matter so much if you hold to maturity, selling before then could significantly affect how much capital is returned. While investment grade bonds are good for a steady income and portfolio diversification, high yield bonds have performed exceptionally well in recent years.
Between 30th December 2000 and 30 Dec 2019, high yield corporate bonds such as those available from Wise Alpha averaged 10.7% annual returns. Default rates on high yield bonds are typically pretty low, as depicted by this chart.
Due to low risk and solid returns compared to shares, corporate bonds have become very popular among investors in recent years. Another reason is that interest rates have been at historic lows for a sustained period of time. As a result, many corporate bonds (and funds) have performed better than expected.
There are several reasons why investors choose corporate bonds, but perhaps the biggest advantage is that they provide a reliable income stream, typically in the form of a bi-annual payment. Of course, upon maturity the initial investment is returned so it’s also a low-risk way to protect your capital.
Furthermore, if you have already have a portfolio of other investments, then corporate bonds are an excellent way of diversifying your portfolio and minimising risk.
Finally, should you need access to cash quickly, in most cases you can easily liquidate your investment on the bonds markets.
There are a lot of types of bonds out there you can invest in. These are the main categories:
These can be bought from the London Stock Exchange’s Bond Platform. The Order book for Retail Bonds (ORB), was launched on February 2010. This was done to encourage firms to go direct to personal investors with smaller amounts to invest, as opposed to the larger corporate bond market dominated by institutions.
The minimum investment for investors is usually £1000 – although you can get involved from as little as £100. These can be bought and sold through brokers and investment platforms (which we will speak more about later).
Most individual investors buy corporate bonds through funds, which invest in a number of companies in order to spread risk. However, this does mean paying fees to a fund manager (typically 0.5%-1%).
In return, the fund manager does a lot of work for you, taking advantage of swings in the market to deliver a return based on the income from the bond, as well as added income from buying below the nominal value and selling above the nominal value.
Theoretically, it’s the job of your fund manager to ‘turbo-charge’ your investment. However, this doesn’t come without risk, as economic factors or rising interest rates can affect how successful your fund manager is at their job.
It’s worth pointing out since the fund invests in a number of companies, there is no maturity date. Corporate bond funds tend to come in four flavours, depending on the breakdown of the investment:
While the creation of ORB in 2010 increased the uptake of corporate bond purchases by making it easier for smaller investors to trade bonds, trading in corporate bonds is still viewed as a market dominated by institutional investors.
However, new platforms such as a WiseAlpha have come along to challenge that paradigm. Just make sure, before taking the plunge into the heady world of corporate bonds market, you know what you’re getting into.
While you have a choice of brokers to buy corporate bonds, experienced investors have much to consider for the best choice of investment option, competitive pricing structures as well as real control when it comes to features, functionality and accessibility.
Here are six of the best choices:
It's debt issued by a company. If you buy a corporate bond, you have effectively given the company a loan that they will pay a fixed amount interest on before returning the full principal at the end of the loan term.
Yes, you could lose it all, although default rates are typically very low. Checking the credit rating of the bond will give you an indication of the level of risk involved.
This was once mainly the case, but it isn't anymore. It's now possible to buy them using the innovation of fractional bonds.
There was a time when buying corporate bonds was only for the likes of big investment funds because of the prohibitively high cost involved. In this WiseAlpha review, we look at how they have made investment grade and high yield bonds accessible to the wider investment community by lowering the barrier to ownership.
While this sounds great, if you’re reading this you will no doubt want to know specific details about the risks, benefits, fees and the organisation behind WiseAlpha before deciding whether or not to place your hard-earned money into an investment with them.
This review is based on my own opinions of using the WiseAlpha site as a customer and our company does not have a financial relationship with them.
WiseAlpha is a self-service website that facilitates the trading of corporate bonds. It has opened this asset class up to the mass market by making bonds affordable to investors.
The high-cost barrier of corporate bonds meant that they have traditionally been accessible to organisations such as funds (pension, hedge, sovereign wealth) and insurance companies. Only individual investors with enough financial clout to meet the minimum of £100,000 denomination sizes could have afforded to buy bonds.
The way that WiseAlpha makes bonds affordable to individuals is done in an innovative way. They purchase bonds from various banks, then split these into much smaller chunks and make them available via their website platform. Individual investors can then purchase a ‘contract note’ which is linked to the bond’s performance.
I have taken a good, hard look at the platform & how it works and will address the important questions. To begin, here is a summary outlining the headline points:
|Company||WiseAlpha Technologies Limited, founded 2014|
|Bonds available||High Yield, Investment Grade|
|Authorised & regulated by||Financial Conduct Authority|
|Minimum investment size||£100 / €100|
|Management fee||Tiered, with a maximum 1% of the portfolio value (annually)|
|Headquarters||Canary Wharf, London|
|Support||Email, Telephone, Live chat|
Next as part of this review of WiseAlpha is an overview of bonds and how they work. If you’re already familiar with corporate bonds, you may want to skip over the next section.
A corporate bond is an interest-bearing debt instrument or obligation, usually issued by a public corporation. The bonds are issued for use for a variety of uses ranging from the financing of acquisitions, funding investment projects and/or for general corporate purposes.
Bonds range in size, typically from €100m to €1bn for single tranches, although many larger corporates issue corporate bonds at any one time for up to the value of several billion. Because the corporate bond is a debt instrument (similar to a mortgage for individuals), it pays the holder (buyer) an interest rate also known as the coupon rate.
At the other end of the spectrum, government-issued or ‘gilt-edged’ bonds are generally viewed as being the least risky ‘bond’ investment, given that they are backed by a sovereign state. These are not available through the WiseAlpha platform and the coupon rates provided by them are very low.
The corporation benefits from the bond investment and generates income from it, so it pays the bondholder a rate of interest. These interest payments are usually made every six months, although sometimes they can be paid quarterly or annually.
That interest cost/rate is benchmarked off the risk-free rate (government bonds) and is dependent upon the credit quality or worthiness of the said corporate.
In most cases, the corporate bond has a fixed maturity. This usually ranges from one to five years from the date of issue, but it is not uncommon for them to have longer maturities – typically up to 30 years. Occasionally, some borrowers have even issued bonds with 100-year maturities (e.g. Disney, Coca-Cola) although they usually have an option to redeem (partially or fully repay) the bonds long before the scheduled maturity.
Corporate bonds are ranked in terms of their quality. In their most basic form, they are ranked as either being investment grade quality or of high yield quality. In the US, high yield bonds are also sometimes referred to as junk bonds (an unfair term in my opinion, by the way). The public ratings are assigned by rating agencies, independent assessors of a company’s intrinsic ability to service their debt obligations. The large rating agencies are Moody’s, S&P and Fitch.
The ratings scale for investment grade corporates is as follows (ranked left to right as being least risky to most risky):
A corporate rated AAA (‘triple-A’, in the jargon) will be assessed as having the best ability to repay its obligation, while one ranked BBB– (‘triple-B minus’) is ranked as being the weakest in the investment grade category.
Over time, ratings can move up or down, usually by one notch (rating) but that can be more if, for example, a weaker rated company is acquired by a much stronger one such that the overall credit quality of the combined entity improves – or moves to the level of the acquirer.
A company whose creditworthiness deteriorates (leveraged acquisition-driven or poor business performance) could eventually see its credit rating fall. A weak investment grade company – perhaps rated BBB-/Baa3/BBB- (S&P/Moody’s/Fitch) – could fall into the high yield category.
The high yield category of ratings is as such from Moody’s, S&P and Fitch (ranked left to right as being least risky to most risky):
The lower the rating, the greater the vulnerability of the interest payment. It, therefore, goes without saying that the lower the credit rating, the higher the probability of default also. That is an important consideration because investors can be attracted to the high interest payments offered by some companies – which might be household names – without being aware of the embedded risks to their investment.
Both investment grade and high yield bonds are available on WiseAlpha.
Historically, corporate bonds have tended to be issued by well-established, publicly listed companies with valuations exceeding say €1bn. However, in recent years, lower policy and market interest rates following the great financial crisis in 2008 have led to massive corporate funding disintermediation. As a result, there has been a shift away from the traditional over-reliance on banks to the capital markets.
Institutional investor demand for higher-yielding debt securities has seen massive growth in the high yield market – typically corporates with smaller market capitalisations (less than €1bn). For example, the high yield market’s size ballooned from around just €50bn in 2008 to over €350bn in 2020. By way of comparison, the investment grade market grew from €900bn to €2.5trn in the corresponding period.
The range of companies that might fund their activities through the corporate bond market is vast. Travel, leisure, telecommunications, utilities (state-owned or otherwise), healthcare groups, the whole gamut of industrial entities taking in automakers (as well as their suppliers, steel and miners) for example, and that is just scratching the surface of borrowers.
Issuing corporate bonds gives the corporate borrower another source of funding for its operational activities as opposed to, say, raising fresh cash through issuing more equity or equity-like instruments (hybrid bonds, for example) or loans from banks. Financial flexibility is an important tool for balance sheet management.
The issuance of corporate bonds is also used to shore up balance sheet cash buffers. That move can be seen as defensive or proactive ahead of a potential major investment or M&A activity. It can be opportunistic in the sense that ‘cheap’ money can be used to provide support for balance sheet strength and bolster credit ratings. That will be an important consideration in terms of reducing the impact of any financial market/macroeconomic stress.
There are many reasons why buying corporate bonds is a worthwhile investment and ought to be considered as part of any diversified investment strategy. They vary depending on the type of investor but generally they:
Like almost all investment vehicles, corporate bonds carry an element of risk. As you will see, the warnings are writ large that if you buy them you could lose all of your money. That’s not to say, though, that it’s very likely that you will.
The long-term default rate of European high yield bonds since 2002 is 3.1%, according to Standard & Poor’s. Choosing bonds that are in line with your risk appetite is therefore worth researching and for high yield bonds, imperative.
As highlighted in the ‘How corporate bonds work’ section, most corporate bonds are rated, independently by the rating agencies. They are assigned a credit rating corresponding to their opinion of the associated risks of default. The lower the rating, the higher the return but the higher the risk of a credit event (possible default).
Most bond prospectuses are made available on the WiseAlpha site, so the pertinent issuer information is there for the reading. Many of the bonds listed are household names, too, which provides some comfort in aiding the understanding of what each company does and how it operates.
Diversifying a bond portfolio can be easily done, either using the Robowise tool (see below) or by manual selection. I generally prefer to do things the manual way, mainly because I am interested in researching each issue and a bit picky about the process.
High yield corporate bonds could be considered a far less risky investment when compared with Peer-to-Peer loans. The main reason for this is the sheer size of the lender and information transparency instead of a similar product from a much riskier small company.
Returns for both of these are not too dissimilar, and so it depends on individual investor risk appetites as to which will be more appealing. I’d feel much safer with a brand name over a startup, for example. However, historically, it has been difficult to buy corporate bonds but it is now made possible by operations such as WiseAlpha.
The contract or participation “notes” that WiseAlpha issues are also known as “fractional” bonds which investors become the registered owners of. You can buy each fractional bond in a minimum amount of £100 or €100 and in increments of a penny thereafter (e.g.. £100.01 if you wanted to).
There are two main types that can be purchased on the platform, Secured and Unsecured. Let’s take a brief overview of the differences between these types of high yield bonds, the risk associated with each and how they might affect your decision to invest in them.
Within the bond universe, there is the possibility to issue debt with differing classifications, much in the same way as equity markets do. For instance, in the equity markets there is common equity (the vast majority of the issued stock) which ranks behind preferred shareholders in the case of a company wind-up.
There are several types of corporate bond securities. They rank, in order of seniority and prioritised debt payouts:
There are other categories such as guaranteed bonds and convertible bonds but they are not relevant here for WiseAlpha.
Secured bonds therefore stand near the front of the queue and will be one of the first to receive a payout if a company defaults (is wound up), after any preferential creditors are paid. These are bonds that will be collateralised on a specific asset which is usually worth more than the size of the bond issue. Once these holders are paid out, next in line will be senior unsecured holders.
Next in the pecking order is the unsecured bond. This type of security is close to the front of the line when it comes to a wind-up, but there is no collaterisation of assets backing the issue. They get what’s left over. Most of the corporate bond market sits within this category of debt issuance.
You can sell fractional bonds on WiseAlpha site, but there are no guarantees of when and if they’ll be sold. This market is nowhere near as liquid as the stock market and others, so you should be prepared to wait, in extremis. There is liquidity on WiseAlpha but that is affected by market conditions and in times of stress, the risks are for exaggerated price movements (lower).
Although secondary trading in corporate bonds (the ability to buy or sell a holding) can be more difficult compared with equities markets, WiseAlpha state on their website that everyone who has wanted to sell have been able to.
Should you put a bond up for sale, it will become visible to others using the platform. You also continue to earn interest while the bond is held for sale. Because they have thousands of investors looking at the market (including some who will have been recently paid their latest coupon payment who have excess funds to reinvest), there could well be buyers lying in wait.
That said, the market has tended to a more buy-and-hold dynamic over the past few years – where investors buy and hold the security to maturity and receive an interest payment every six months. At maturity, they receive their capital back.
On the WiseAlpha platform, you can create a sell order by clicking the “Sell” button and that amount that you wish to put up for sale. Unless you decide to cancel your sell order, it will execute as soon as another WiseAlpha customer puts in a new sell order for the same fractional bond.
It might be that the sell order is executed in chunks until it’s fully completed, depending on the size of the corresponding buy orders.
After making a transaction, you don’t own the bond directly. WiseAlpha plc does. They are buying a note in these fractional bonds, so you’ll want to know what happens if something goes awry.
Your funds will actually be held in trust with a segregated account with London-based GCEN, (Global Custodial Services Limited) an FCA authorised and regulated company (FCA FRN 595875). For what it’s worth, GCEN has been in existence since 2003 and they have earned an “Excellent” Trustpilot rating.
Thus, your funds that are used to pay for each bond are locked away where WiseAlpha can’t touch it until either the bond reaches maturity or you decide to sell it early.
This protection is explained in full on the WiseAlpha blog:
For UK-based investors, the government’s Financial Services Compensation Scheme provides protection of up to £85,000 per financial products if their provider goes bust. This includes pensions, bank accounts, mortgages and insurance as well as some investments.
At the time of writing, the Fractional Bonds bought via WiseAlpha are not eligible for the FSCS protection scheme, even though the company is FCA regulated.
Diversifying a portfolio by adding corporate bonds that you can choose yourself provides an interesting alternative to more traditional investments. Many of us already hold shares, peer-to-peer investments and perhaps even corporate bond fund ETFs. It won’t suit everyone’s investment strategy, but for those who like the idea of receiving steady returns at a predetermined rate of interest, this will be a boon. So, who is able to take advantage of it?
It makes sense to be either from the UK or the EU (or hold funds in these regions), as those are the currency denominations of the bonds on offer. To qualify to use the platform you must be a suitable investor, and will need to self-certify as one of the following:
For these purposes, a high net worth individual is defined as someone who:
You fall under this category of investor if you:
In the main, investors generally buy and hold corporate bonds rather than frequently trading them based on price movements, so it’s important that investors fully appreciate this.
If you have professional investment experience or are authorised by the Financial Conduct Authority (FCA), you’re classed as an Investment Professional who is also suitable to use WiseAlpha. The FCA’s Financial Services Register can be searched here. Institutions (e.g. companies) that are set up as legal entities to manage investments for the entity are also qualified investors for the purposes of using WiseAlpha.
This is an individual who has taken advice from an FCA authorised advisor in relation to a WiseAlpha investment.
This is a person (or people) who will manage investment/s with WiseAlpha for a legal entity (institution).
In addition to making the above declaration, platform users will also need to answer a set of questions and pass the WiseAlpha questionnaire. This multiple-choice test is designed to ensure that only investors who understand all of the risks associated with corporate bonds can get access to the system.
You will only have a set number of attempts to answer the questions correctly, so make sure that you are well prepared and up to speed with your knowledge of the corporate bond market. The quiz is not something that will overly tax the brains of most people who are familiar with the subject matter.
The service fee structure on WiseAlpha.com is relatively straightforward. You only pay fees when your interest payments are received, which equates to no up-front additional costs.
There are no other hidden charges, either, which means that all of the admin, use of the website etc is all taken care of for this inclusive price. Here is how it works:
For purchases, there is an annual tiered system that works as follows:
The minimum amount that you can invest in the financial instruments available on WiseAlpha is a mere £100. There is no maximum ceiling on the amount that can be invested and the higher the investment is, the lower the overall average fees.
By way of an illustration, if you are a relatively wealthy investor who buys (e.g.) £1m in a 3-year 6.75% bond, the annual service fee that you will pay is 0.2925% or £2,925. The following table illustrates what the investment would return net when held until maturity.
|Payments Received||Service Fees||Pre-Tax Net Gain|
|Year 1 Interest||£67,500||£2,925||£64,575|
|Year 2 Interest||£67,500||£2,925||£64,575|
|Year 3 Interest||£67,500||£2,925||£64,575|
If you decide to sell your bonds prior to their maturity date for whatever reason, there is a flat 0.25% fee which is applied to the principal amount. It’s worth checking, but for some EUR denominated fractional bonds, I’ve seen zero fees being offered. Great news if you have Euros to invest. There are far more GBP-denominated bonds than EUR ones on the system, although more are gradually being added.
Adding funds into WiseAlpha is fairly straightforward. This can be done using a debit card or bank transfer. The handling of debit card payments goes via a company called ‘Global Collect Services USA’, so you’ll see that appear on your statement. In comparison to other trading platforms, WiseAlpha comes out pretty favourably thanks to their straightforward fees structure.
We looked into the information security controls of WiseAlpha for completeness. After all, this could be significant sums of money that you’re entrusting them with.
Access to the website platform is secured using the industry-standard SSL (secure sockets layer) that is used all over the Internet these days. This is where you see a padlock icon in the browser address bar. It’s used to prevent hackers from snooping on your communications with the site, providing privacy via prevention of interception of user names, passwords as well as any interactivity that you have with it.
Beyond that, there is 2-factor authentication in place as an added measure. This works by prompting you for a code which is sent to your mobile phone every time you log in to use the system. Therefore, only you should be able to gain access to your account (unless someone also steals your phone and can access it).
The WiseAlpha.com servers reside in data centres located in Ireland that are managed using industry-leading AWS cloud computing infrastructure. High availability firewalls protect clients from external threats and data is replicated across multiple availability zones in separate physical locations to ensure it is always highly accessible. I know all this because I asked!
WiseAlpha Technologies Limited, a private limited company registered in England with company number 08967521 was registered in early 2014 by Rezaah Ahmad, who is one of the main shareholders along with Michael Curtis. Rezaah is the sole Director.
WiseAlpha has also raised funds using the crowdfunding platform Crowdcube and Seedrs for marketing & advertising purposes. Companies House information lists all of the various allotments of A, B and C class shares made since inception if you are interested.
WiseAlpha Technologies Ltd provides an exclusive license to WiseAlpha plc, a separate legal entity.
The plc is an Irish company, based at 12 Merrion Square in Dublin (company number 650450) and it acts as a counterparty to clients who invest in each of WiseAlpha’s Fractional Bonds. These are in turn backed by the underlying “actual” corporate bond whose economic terms pass through to the Fractional ones.
Although the plc owns the bond, and any interest payments (and the principal at maturity) received for each corresponding bond proportionately flow through on a pro-rata basis to WiseAlpha Technologies’ clients (net of the service fee).
The company’s HQ itself is based out of London’s Canary Wharf, one of the main hubs of the UK finance industry. Rezaah Ahmad is the CEO and responsible for the company’s direction and day-to-day operations.
The company has a small, dedicated support team which (in my experience) has always been very fast in answering any query that I’ve had. The options for contacting them are plenty; phone, email and live chat. It’s not yet 24-hour support, however, working UK business hours.
Once logged in to WiseAlpha, you can browse the different markets and see all of the bonds by clicking on the “Market” link.
Within this section, different categories are available in either a list or grid view. The grid view provides you with a quick overview of what’s on offer and important details pertaining to each bond issue. You can then drill into the details of each one by clicking on it to find out more.
Where you see the Buy button available, there are bonds that can be bought and the Status column shows you the amount available on the market at the current time. Where the full allocation of bonds is already purchased by other customers, you need to put in a request to buy more of these should you want them.
There are also some bonds on WiseAlpha that are ‘sold out’. That is, the underlying bond purchased by WiseAlpha plc has been snapped up completely by other customers. In this case, you won’t see the “Buy” button available on the system. Rather, there will be a heart-shaped icon taking its place, like so in the case of the EDF bond:
By clicking on the heart, this tells WiseAlpha that you are interested in this particular bond. You will then receive an email whenever this bond becomes available. What’s more, if there is a particular corporate bond that is not listed on the WiseAlpha platform at all, you can contact the support team at email@example.com and put in your request.
One of the features of the WiseAlpha platform that must be mentioned is called ‘Robowise’. As the name might suggest, it’s a way to automatically create a balanced portfolio based on your preferences.
Let’s say that you don’t have the time or inclination to research individual bond issues but do want a piece of the action. If that’s the case then you can put your target return into Robowise which will select a corresponding basket of bonds. You can even choose to have Robowise manage multiple portfolios while you personally manage your own additional portfolio of self-selected bonds.
A balanced portfolio or Adventurous one can be selected. Clearly, the latter is inherently riskier with higher returns.
Robowise may also sell bonds automatically on your behalf in the act of balancing your portfolio. There’s good news here in that the 0.25% fee that is normally charged for selling a bond prior to mature does not apply to sell transactions initiated by Robowise.
You can buy GBP and EUR denominated bonds on the platform. Senior Secured and Unsecured bonds provide different levels of risk and return. Here is a sample of some of the bonds currently available (updated October, 2020).
I am using WiseAlpha for my corporate bond investment portfolio and writing about the management of it here on our website.
You will probably have got the gist of my opinion of the offering from having read everything above in this review. However, it would be prudent to get a wider view. Naturally, the people at WiseAlpha know that, too, and have thus been very transparent in asking their users to provide public reviews and the results are there on the Trustpilot site for all to see.
If you do look there, you will note that the number of “excellent” reviews by far outweighs the rest. The majority of people appear to be very happy with it. In fact, of the very few ‘poor’ reviews on that site, one of them is left by someone who couldn’t get past the multiple-choice quiz questions and another is from someone who couldn’t log in. That should speak for itself.
There are many factors to consider and it will ultimately come down to a calculated risk on your part based on all of the facts. For some investors, the service fee of only 1% could be a dealbreaker. Are you comfortable with buy-and-hold or do you think that you might need to sell before the bond matures?
In a nutshell, WiseAlpha works by allowing individual investors to buy into fractional corporate bonds using their online platform.
Investment Grade and High Yield corporate bonds are available on the WiseAlpha platform.
Yes, you can sell previously purchased corporate bonds by accessing WiseAlpha's secondary market.
You will pay a maximum of 1% in management fees on WiseAlpha fractional bond purchases if you buy and hold until maturity.
That’s it for this WiseAlpha review. Finally, always keep in mind that an investment in corporate bonds carries much more risk than a savings account – and you could lose all of your money.