WiseAlpha investment platform review
WiseAlpha is an online platform that offers individual investors senior secured and high yield corporate bonds and loans from UK companies.
You invest in WiseAlpha Participation Notes, which in turn are backed by senior secured loans or bonds that WiseAlpha acquired.
As an investor, you are not lending to a borrower, you are investing in a Note from WiseAlpha that is a debt security. The average returns for investors are around 8%.
The platform opens the market of institutional corporate bonds to individual investors that can start investing with as little as 100 GBP.
Corporate bonds are a defensive asset class. They are a lower risk investment compared for example to shares. If a company goes bankrupt, corporate bonds have priority over shares. Below is a diagram describing the order investors are paid when a company becomes insolvent.
WiseAlpha argues their case very well. 36% of the UK pension funds invest in bonds. Everyday investors don’t invest in corporate bonds because they need to invest at least 100.000 GBP in a bond. This is a huge barrier for everyday investors. Using WiseAlpha this type of asset is available to everyone.
Keeping money into a savings account is not a viable option today. The interest rates offered by the banks don’t even cover the inflation rate.
One interesting rule of thumb is to invest in bonds the same per cent of your capital as your age is. So, if you’re 30, you should invest 30% of your capital in bonds, if you’re 50, then 50%.
Opening an account
You’ll need an email address and a phone number to open an account. Once you register you can transfer money into your account either by debit card or bank transfer.
Investing in WiseAlpha
WiseAlpha separates the offers into senior secured and high yield unsecured bonds and loans.
Senior secured bonds are loans issued by a company that are secured with their assets. They have a fixed interest rate.
Unsecured high yield bonds (“junk” bonds) have a higher risk but they come with higher interest rates. They are not backed by company assets so in case of bankruptcy, they won’t be worth too much. They have the potential for capital appreciation if the company improves its performance.
You can see on the Market page the list of bonds offered, split into different markets for EUR and GBP. Once you select a company, you can see more details about it. This includes financial details, assets, revenue, cash flow. If the company suits your interests, you can open an order and buy.
Once you open an order, you’ll see it in the Open Buy Orders section.
Let’s say you don’t want to spend time by researching each company you could potentially invest in. You can choose the auto-invest tool the platform offers. Its name is Robowise and it will handle buying/selling bonds and loans for you based on the level of risk you selected.
You can also select in what industry sector you’ll be willing to invest. You can even select individual companies based on your interests. This will cover all your needs for greater customization.
Based on the selected criteria, you can see what are the companies Robowise is investing.
Conclusions on WiseAlpha
WiseAlpha offers an interesting product for individual investors. You don’t need large amounts of money to buy corporate bonds. These are safer than the usual peer to peer lending options found on other platforms. You can invest in financial products that are usually only available to large banks, pension funds or specialist funds.
The platform lists only well-known companies (Virgin Media, Deutsche Bank). It’s easy to do your own research on these companies outside of WiseAlpha platform.
You can choose the level of risk you’re comfortable to take by either investing in senior secured bonds or high yield unsecured bonds. If for some reason you want to sell your investment earlier, you can sell it on the secondary market (paying a 0.25% fee to WiseAlpha).
There is an annual service fee of 1%, which is not great, as it will cut your profits a bit, but I think I can live with that.
The Robowise feature is great, and it saves you time. You can choose the level of risk you’re comfortable with and then it will do the work for you. For now, that’s what I use until I’ll get more familiar with corporate bonds.
The website is modern and intuitive to use. The information offered about the companies listed is great and contains lots of financial details. There’s also an investor guide on the website explaining what their product is and how it works. You can find it here.