Basset & Gold offer fixed income bonds paying investors between 3.14% and 9.01%. They then use investors’ funds to provide financing to lending platforms such as short term lenders, balance sheet lenders and P2P lending platforms at rates between 8% and 15%. They offer investments from £1,000, including the Innovative Finance ISA.
Expected Returns: Bonds offer between 3.14% (30 day access), 6.22% (3 year), 7.46% (5 year), 9.01% (5 year compounded)
Early Sell Out: No secondary market, but may be possible to transfer to another investor
New Customer Cashback Bonus: None
Minimum Investment: £1,000
Speed of Investment: Bonds start accruing interest on 1st of month after application monthly window close
Basset & Gold operate differently to most of the other lending platforms I’ve looked at so far. Instead of allowing investors to lend directly to consumers or small businesses, they aggregate the capital and lend it themselves via 3rd parties. Basset & Gold sell the idea as:
you could always go ahead and invest yourself in a couple of platforms (depending on how much capital you have available) without buying the Basset & Gold bonds, however you will quickly discover that picking and choosing between loans is a full time job, and much like picking stocks, requires a significant amount of research and a deep understanding of the market.
Instead of making loan contracts directly with borrowers, you trust your capital to Basset & Gold, who then use this to make investments and pay you a fixed return. In a way it reminds me of BondMason (a P2P investment manager). In both cases the platforms claim to:
- use their experience to do due diligence and select loans on your behalf
- have access to higher return opportunities as a high value/institutional investor
They differ from BondMason as they automatically spread your investment over the whole loan book rather than giving you ownership of a number of individual loan contracts.
They also differ in the way they offer investors returns. BondMason invest your money and take a 1%-1.5% fixed fee regardless of performance, whereas Basset & Gold guarantee a fixed rate of return to investors and profit from the margin on top. Annual, non-compounded returns are targeted around 6-7% after fees on both platforms. On the one hand this means that Basset & Gold’s interests are more aligned with investors: to have higher returns rather than higher investment volumes. On the other hand, what happens to their business if their investments under-perform the fixed rate they have to pay investors? More below.
These are the different bonds they offer:
Investments must be over £1,000 and beyond that in any multiple of £10. For over 55’s there’s a ‘pensioner bond’ which pays around 4.3%. This works on 1 year terms extendable up to 5 years.
These investments are released in monthly ‘application windows’, that are marked at the top of the investment pages:
Application window deadline (my highlighting in burnt red)
As I understand it these application windows are ongoing and finish on the last working day of each month. You have to invest by the deadline to start accruing interest on the 1st of the following month. You’ll then receive the bond certification for the 15th and then the first interest payment on the 15th of the month after. At the end of each window Basset & Gold take another look at the rates on offer and may adjust the interest they offer for the different bonds.
It doesn’t matter if you deposit money on the first or last working day of a month, interest only starts accruing on the 1st of the next month.
Basset & Gold are an appointed representative of Gallium Fund Solutions. This means that Gallium are authorised by the FCA, and in turn have full responsibility to ensure Basset & Gold comply with the FCA’s rules. Gallium are also responsible for all products sold and advice given. You can read more about what this means on the FCA website.
Many other alternative finance platforms have a similar arrangement. Gallium Fund Solutions manage 13 other representatives, including Bricklane, Brickowner, CapitalRise and Global Alternatives Operations (the company behind PropertyCrowd). Resolution Compliance do the same for 28 different companies including Growth Street, Credit Peers and the company behind Property Moose.
Basset & Gold have two separate companies: Basset Gold LTD which does the marketing and Basset Gold PLC which issues the bonds. Both of these are appointed representatives of Gallium Fund Solutions and so are authorised by the FCA. Both companies are directed by Dror Sordo who previously ran Plus500, a AIM listed online trading site.
What Happens if Basset & Gold goes Bust?
My understanding of the ‘more traditional’ P2P lending sites like Funding Circle is that in the event of the platform going into administration the direct contracts between investor and borrower are still valid. The platforms would arrange with a 3rd party who would step in to administer the ongoing repayments, perhaps with a haircut for the admin fee. How does it work for Basset & Gold and their bonds?
I had a couple of conversations with Basset & Gold over the phone and online chat to try to understand. Their short answer is something like “loans are backed by security and investors have a form of protection up to £50,000 under the FSCS (financial services compensation scheme)”. Beyond this I made the following notes:
- their biggest concern is loans not repaying rather than the platform itself running into financial problems, which is why they talk about the loan security.
- if there was a case where they needed to, they would sell off their loans to raise funds to repay investors
- their only debtors are the investors
With regards to the FSCS protection, Basset & Gold clarify on their website: “The FSCS does not cover poor investment performance. It covers firms and appointed representatives that default on their obligations to customers, but not the investments they sell to them…”.
Innovative Finance ISA Questions
Basset & Gold offer the Innovative Finance ISA (IF ISA), with deposits from £1,000. Some notes specific to the Basset & Gold IF ISA:
- There’s no additional fees
- They are limited: Basset & Gold are only opening an initial 200 then having a waiting list
- There’s currently 2 investment products within the ISA the 3 year compounding and the 3 year non compounding
- Payments are on the 15th of every month for the 3 year non-compounding and go to your non-ISA bank account
I decided to try them out for the IF ISA as the deadline of the 2016/2017 tax year drew near. I registered on the evening of April 4th and did the bank transfer that night.
The sign up process for the ISA was quite straight forward, perhaps 7 or 8 pages, mainly questions around what investor type you are and a questionnaire to ensure you know some basics about investing and the chances of losing money. Fortunately the questionnaire warns you if you make any mistakes:
It gave me two options for the IF ISA:
Either a 3 year monthly income bond that pays out the interest each month, or a compounding bond that automatically reinvests it. The actual monthly return is the same in both options. To get from 6.12% to 20.1% you can do the calculation (1+6.12%/12)^36 [i.e. the monthly interest applied for 3 x 12 months].
Interestingly in the terms on the left the authorisation was asked for Gallium Fund Solutions to hold the ISA/Cash investments rather than Basset & Gold. Once I completed the sign up I had to transfer the cash by bank transfer or post a cheque to a Gallium Fund Solutions’ bank account (Barclays for those of you watching your £85k FSCS limits).
The next morning I had a call from my relationship manager at Basset & Gold, who explained the remaining process and asked if I had any questions. I’d opened the account on the 4th April, and this was the schedule:
- Interest starts accruing 1st May
- Bond Certificate sent in post on 15th May to my address
- 1st interest payment sent on 15th June, then every month afterwards on the 15th
The investment is managed completely over the phone and email at the moment with no online login portal.
Pros & Cons
Basset & Gold Pros
- ‘Hands-off’/ automated investment product with all due diligence & loan picking done by Basset & Gold.
- The rates of return on the fixed term products are similar or higher to other platforms that allow a similar hands-off investment (e.g. BondMason, Zopa Plus, Funding Circle auto-bid) but have the advantage of a fixed return you know in advance.
- Investment capital is spread across a diversified portfolio on the first of the following month, with no additional investment lag.
- The risk of bad-debt is taken on by Basset & Gold and so interests are aligned with investors to ensure quality of returns over quantity of investments.
- Basset & Gold (as an appointed representative) are authorised by the FCA and so have some degree of additional protection via the FSCS (though not for investment performance).
- They offer the Innovative Finance ISA (IF ISA) at no additional charge.
- They offer some handy functions targeted at those who need to live on their investment income: either fixed payments direct to your bank each month or the fixed income pensioner bonds.
- You are assigned ‘dedicated relationship manager’ when you join.
Basset & Gold Cons
- If loans underperform there may be greater platform risk than other peer to peer lending sites where the majority of the loan-performance-risk is on the investors.
- The 30-day product pays just a little over 3%: better than the bank but not great for P2P lending.
- If you want higher returns you have to lock your investment in for 3 or 5 years with no official early sell-out mechanism.
- The company is not transparent on where your money is actually invested.
- Mini-bonds are an unsecured debt, as opposed to direct lending on secured debt.
- The ISA has a restricted list of products: no 30-day or 5 year product
Basset & Gold offer a ‘hands-off’ investment product for those that want to invest in peer to peer lending without the hassle of doing it themselves. Their fixed income returns, paid directly to your bank each month if you wish, may be particularly appealing to those who live off their investment income. Those who are not particularly used to typical P2P platforms may appreciate the relationship manager to discuss or ask questions.
It is hard to fully understand the risk because you are not fully aware what your capital is being invested in and what exactly would happen in the worst case scenario of a platform default. My personal strategy with P2P has been to spread investments across a range of different platforms, loan-types and loans to reduce the impact of any localised problems.
Disclaimer: Posts on P2PBlog are independent and unbiased. However where they exist I add affiliate or refer-a-friend links which pay me a commission if you join and register, which goes towards running and growing the blog. In this case the links above to Basset & Gold are affiliate links. Please consult a financial adviser for independent advice.