Abundance Investment are one of the first established P2P platforms to offer a fully functioning IF ISA. They focus on renewable energy projects like wind turbines or solar farms. Looking down a list of their completed investments, they generally target between 5% and 12%.
I haven’t invested with them yet myself. The website looks great: as I write this the image of their upcoming investment is animated with rain based on the local weather, closed investments even have cars driving around the leading image.
But, what’s probably put me off so far was not really understanding the type of investments they offered. They use debentures and talk about Internal Rates of Return (IRR) rather than a fixed monthly interest rate. Given the release of the IF ISA I thought they would be worth a closer look, so I asked Abundance Investment a few questions in a Q&A:
Key Facts (General):
Expected Returns: 6-9% IRR (Internal Rate of Return). As with any investment product, capital is at risk. Investments are long term and may not be readily realisable.
Historic Returns: 6-9% IRR
When did you launch? First project launched in July 2012
Total Investment to date: £39,500,000
Any New Customer Cashback Offers? Currently running an offer on the ISA: a 2% AER return on cash balances held in an Abundance ISA until 31 May 2017. It is open to all ISA customers, whether new or existing.
Key Facts (IF ISA):
Minimum Investment to open ISA: £5
Minimum Investment per loan/investment: £5
IF ISA Fees: None
Is it a ‘Flexible’ ISA? Yes
Do you allow transfers in from existing ISAs? Yes
The Abundance Investment ISA has been really popular so far, after just about 6 month this is how the subscribed ISA funds compare against the existing investment total:
Q: What type of investments do you offer?
A: Abundance offers investments in the form of debentures and bonds which are both regulated investments. Most Abundance investments offer returns of capital and interest every six months and all are tradeable on our Marketplace.
Q: How did it all begin: what is the background to the platform?
A: Abundance’s three founders come from very different career backgrounds: Karl Harder started out as a parliamentary researcher before founding his own green business; Louise Wilson was in a senior position at UBS Investment Bank, in charge of multimillion pound share offers and fundraising for global companies; Bruce Davis was an anthropologist who specialised in the study of how we think about and use money. He had helped create the world’s first peer-to-peer lending site Zopa.
Together they wanted to offer people investments in the things they cared about, without a compromise on financial return. The result was Abundance: beginning with renewable energy, people could invest from just £5 into individual projects that do something good for the environment and society with a genuinely good financial return too. Fees are paid by each investment project rather than by investors, so when Abundance quotes a return that is what investors can expect to get.
Having started with established renewable energy such as wind, solar, and biomass, Abundance is now looking to enter new energy sectors – e.g. tidal, anaerobic digestion – and wider social investments in the things we need more of – e.g. schools, social housing, GP surgeries.
Q: Can you explain a little more how the IRR’s and Debentures you offer work?
A: When an investment is made on Abundance it is in the form of a Debenture. Just as you might buy a bond or a share, you buy a Debenture, which is a regulated investment. Their features and benefits and the types of Debenture can be found on our website.
We typically quote our returns in the form of an IRR – Internal Rate of Return. We use IRR because it gives an average annual return that accounts for two things:
- When you get money back.
- How much money you get back. This makes it the best way to describe the returns on our investments as they typically return an equal portion of the capital invested each six months, alongside an interest payment at the same time.
So, as time goes on, the money you invested and the interest you are earning gets returned to you at regular intervals, and you can spend or reinvest it as you see fit. All the while, your ongoing returns in the project are still calculated based on the amount you originally invested so that as your outstanding capital in the project gets smaller, your returns relative to that capital are increasing.
Q: Is there an Early Sell out option or Secondary Market?
A: Yes – there is a Marketplace on Abundance where existing investors can look to sell their investments to other Abundance members who can place bids to buy the investments. There are no fees for using the Marketplace on Abundance. There is, however, no guarantee that an investment will sell or achieve the price desired.
Q: Automated Investment: How easy is it for Investors to maintain their Investment?
A: Abundance does not offer an automated investment option as each investment is standalone and has its own Offer Document which should be reviewed before investing. When cash returns are made the money sits in a customer’s Abundance account and can be reinvested into new projects or withdrawn from their account.
Q: What plans have you for the future?
A: Abundance has big plans for the future. In the near term these include expanding into new sectors within energy, such as anaerobic digestion, hydro, and tidal, as well as larger wind and solar projects where the opportunity presents. In the medium to long term, Abundance has plans to expand into social investments more widely. This will include part financing new schools, hospitals, social housing, community buildings, and more.