Continuing to explain the notion of asset-backed* lending leads us to what exactly Barbican is and what the potential benefits of investing through an ISA in the Barbican bond are. Asset-backed lending as a whole refers to a form of lending that involves assets being used to provide security over an investment; Barbican’s lending activity is no different.
Below contains more information into what exactly investing through an ISA in the Barbican Bond is, what form of assets are ultimately invested in as well as the potential benefits of investing in the Barbican Bond.
The Barbican ISA is an Innovative Finance ISA, part of a growing set of investment opportunities, through the crowdfunding market. Individuals, in this case can lend to The Barbican Group’s subsidiary Barbican Bond Co 1 Limited, allowing for funds to ultimately be used in investments into companies; companies that are sustainable, that look towards a healthier environment, society and future economic outlook as well as refinancing within the group.
The Barbican bond is asset-backed, so in the event of administration or insolvency, assets could be used in an effort to repay investors with the help of the security trustee. Barbican invest into property, the form of property is care homes and investments by Barbican will primarily go to expanding current portfolios, refurbishing the existing homes, in an attempt to maximise efficiency and ultimately financing the group.
These assets would be managed by a security trustee on behalf of the bondholders, in the event of administration or insolvency. The Barbican ISA is somewhat unique, we’re not aware of another ISA that allows support of investments into a bond of this nature.
Although asset-backed bond investments still come with risks, there are many reasons as to why asset backed bond investments could be the way to go in your investment endeavours. A major reason being the high rates offered through the ISA, when compared to cash ISAs, through cutting out the middle-man and allowing for a greater potential return**.
The Barbican Bond in particular holds several benefits for investors including:
*Risk – The fact that the bond is asset-backed would not guarantee that all capital would be repaid. This also means that there is a liquidity risk and there is likely to be a delay in repaying your capital should you request it.
**Investment through the Innovative Finance ISA may offer a higher rate of return, but it is likely to be harder to transfer/sell your investment in the bond than if you were using a cash ISA. The IFISA has no FSCS protection and you should review in more detail before making any decision and read the risk section fully before proceeding any further.
Capital at Risk: Please be aware when investing that your capital is at risk and the value of your investment can go down as well as up. You may get back less than you invested.