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How Do Loan Notes Compare With Other Forms Of Investment?

Farrbury Capital | June 25, 2019

Every type of investment has its own particular advantages. That’s why most professional investors have mixed portfolios – to provide them with the right balance of investments in terms of risk, duration and exit strategy.

In order to look at loan notes from every angle, Farrbury Capital Partners have compared key features of this alternative investment product to three other mainstream investment vehicles: buy to let property, ISAs and stocks and shares.

“There’s a lot of misinformation surrounding loan notes, so one of our objectives is to dispel the myths and show clearly what loan notes are and why they are such an attractive form of investment. Part of that work has involved undertaking an honest appraisal of the merits of loan notes versus traditional methods of investment. With this in mind, we wanted to share our findings with those currently considering investing in loan notes.”

James Hayward, Investment Director, Farrbury Capital Partners

Loan note investment compared to other types of investment

 

  Loan note Buy to let property ISA Stocks and shares
Average yield 12% 4.5% 0.7% variable
Agent’s fees No Yes No No
Stamp duty No Yes No No
Management fees No Yes No No
Ground rent/service charge No Yes No No
Exit fees No Yes No No
Investment cap No No Yes No
Multiple securities in place Yes No Yes Yes
Immediate income Yes Sometimes Yes Yes
Susceptible to market fluctuations/geopolitical events No Yes No Yes

As can be seen from the table above, loan note investments come with a number of advantages when compared to traditional forms of investments. The lack of fees, stamp duty land tax and service charges are a draw for many investors, while others are drawn to loan notes as a result of their lack of investment cap. The combination of multiple securities and immediate income is what attracts others. Loan notes’ resilience in the current market and geopolitical events are no doubt a major plus point in the current era of Brexit uncertainty.

“Loan notes tick many boxes that other forms of investment don’t. Usually the choice of sophisticated and high net worth professional investors, they can deliver impressive returns while offering a relative safe haven from shifting political currents – the latter being the likely reason that we’re seeing so much interest in loan notes as a form of investment right now.”

James Hayward, Investment Director, Farrbury Capital Partners

Please contact Farrbury Capital Partners by emailing info@farrburycapital.com or calling 0203 973 1510 for further details.