A government-backed campaign to expand private investor involvement in corporate bonds is launched today with the support of the London Stock Exchange and Financial Conduct Authority.
According to The Times, chancellor Rachel Reeves is due to proclaim “a new golden age” for retail investing in corporate bonds as part of the Treasury’s effort to put more UK savings into productive investment.
The paper says direct investment in bonds issued by companies has collapsed in recent years after EU rules effectively prevented any single investment of less than £100,000. That limit has been axed meaning investors can put as little as £1 into a bond transaction.
To reassure novice investors, the LSE will launch a kitemark called Access Bonds which companies can use to show they are suitable investments. It will run a “Bond With Britain” education campaign.
The FCA, the City regulator, will let issuers tag their offerings as “plain vanilla-listed bonds” (PVLBs) if they are considered straightforward with standardised terms.
Barclays estimates that 13m people in the UK holding £430bn in cash could consider investing in corporate bonds which generally offer higher interest than cash with the potential for some capital growth. Corporate bonds typically yield at least a percentage more than government bonds, or gilts, but carry a small risk of default.
A previous initiative, the Order Book for Retail Bonds in 2010, is considered to have flopped. The government hopes the greater involvement of companies and investment platforms this time will make its campaign more successful.
Our view
James Carthew, head of investment company research at QuotedData, said: “For investors who might be nervous about picking their own bond investments, there are always the five existing investment companies in the AIC’s Debt – Loans and Bonds sector. These are already in demand and issuing shares making them one of the few growth areas of the investment companies industry currently, one that could be a lot bigger.”
