wiseAlpha Technologies is an innovative marketplace lending platform (www.wisealpha.com). wiseAlpha gives members the opportunity to earn attractive returns by investing in secured corporate loans and bonds (via the issuance of its Notes) of potentially well-known British brand name companies such as Virgin Media, RAC, Vue, New Look, Enterprise Inns and which can yield gross returns of up to 8.5% per annum. The companies are typically established blue-chip companies and have annual revenues of between £100m and several £bn pounds. We believe that our brand name and large established company focus sets us apart from other retail fixed income investment platforms. wisealpha is part of the growing Fintech and ‘DIY lending’ movement that is disrupting traditional asset management and finance markets by moving markets on-line and facilitating smaller investments thereby democratizing financial markets. Through wiseAlpha we are aiming to innovate the large corporate debt investment market.
Based on our industry experience, the corporate debt investment market is one of the largest markets in the world but has so far remained in the hands of the largest financial firms who charge significant fees to investors for the privilege to gain exposure to the market – we believe it is time this changed.
Traditionally the corporate debt market has been the domain of large global investment banks and large asset managers who lend directly or indirectly to large corporates via what we believe is an inefficient and cumbersome ‘over the counter’ banking market. We believe this market has been slow to adapt to changes in financial technology and has limited investors of all sizes accessing it. wiseAlpha aims to change this by bringing a wider investment audience to the asset class. We believe the corporate loan market is not only the largest but one of the last few financial niches yet to be penetrated by a Fintech model.
Substantial accomplishments to date
The CEO and initial investors of wiseAlpha have funded the development of the web platform which has now recently gone live. Since we launched our site at the end of last year we have set up our operations with our relationship global investment banks. We have recently carried out our first transactions to prove the business model and are now seeking to raise mainstream awareness of our platform so that we can build our user base and create a marketplace for this asset class for everyone in the UK to enjoy and use.
So far we have had a few articles written about us by some journalists from the Telegraph, Daily Mail, CityAm, Financial News and MoneyWeek (see our media section on our website at https://www.wisealpha.com/about-us/media-centre).
How wiseAlpha works
The platform enables members to gain exposure to senior secured corporate loans and bonds on a company by company basis and build their own portfolios of loans and bonds.
From our experience our exclusive segment of the corporate debt market i.e senior secured corporate loans and bonds have the potential to offer better yields than investment grade or 'retail bonds' (which are a different category) and those which are linked to LIBOR such that their coupons rise with interest rates.
The loans and bonds wiseAlpha lists on its platform are secured on the assets of the company and this collateral backing offers a degree of capital and structural protection for investors. Studies show that the senior secured asset class also compares favourably on a risk-adjusted return basis versus alternative asset classes such as high yield bonds and equities.
Investors who use the stock market to invest in dividend or income stocks can have variable cash yields and may be exposed to volatility risk in the price of the underlying shares which can fluctuate dramatically with changes in the performance of the company or in times of stock market or economic turbulence.
Interest is received by investors on a quarterly or semi-annual basis with the principal paid at maturity or during the life of the investment. Investors can sell their investments via wiseAlpha’s matched bargain based sale process which provides for the matching of buyers and sellers to create potential liquidity. There are no advisors, no funds and no complicated administration charges and conditions.
Use of proceeds
The primary use of the funds is to:
- Fund our forthcoming marketing campaign (digital and some outdoor)
- Add additional staff members to our team
To this end we have teamed up with Chapter Agency (http://chapteragency.com/work/), an award winning brand agency that has worked closely on the branding and marketing for Crowdcube and we plan to run similar marketing campaigns following a successful public crowdfunding equity raise.
wiseAlpha does not discriminate between different types of members. We expect our members to range from professional fixed income investors and private family offices down to approved individual investors looking to earn a potentially attractive rate of interest for their money. Members of wiseAlpha can invest from £100 up to £10m plus in a single investment.
We believe that 'the crowd' are an important part of our target members but those individuals who are familiar with the fixed income market and who are in a position to understand the risk-reward profile of lending to established companies on a secured basis vis-a-vis other lending alternatives are potentially the larger investors who may use our site.
Overtime as we move to a quasi-exchange format (similar to a stock-market) institutions as well as individuals will also become our target market (these investors generally like to see readily available liquidity in large size before they use a platform or exchange).
Investment banks and specialist credit funds can also become members and utilise the wiseAlpha platform to sell senior secured loans that they have underwritten or hold in order to reach a wider investment audience.
Characteristics of target market
Marketplace lending Industry
Marketplace lending covers a number of different niches and operating models, but the basic premise involves the investment of capital via online platforms to lend directly and indirectly to consumers (e.g. Lending Club) and small businesses (e.g. Funding Circle). The range of marketplace lending loans available today consists of many unsecured personal loans and secured and unsecured small business loans. Alternative specialty niches include mortgages, student loans, auto loans, and even invoice factoring loans. And now wiseAlpha is representing the corporate loan market on a web-based platform for individual investors. Bloomberg estimated that $77bn of peer-to-peer investment was transacted globally in 2015 and Morgan Stanley (Morgan Stanley research, “Global Market Place Lending” May 19 2015) will be somewhere between $150-490bn by 2020.
We intend to create more awareness to the general public through a targeted marketing campaign focussed on the following areas:
- Digital/web advertising
- Press editorials and advertorials to educate the public about our product
- Advertising in specific areas such as Canary Wharf and London financial hotspots using engaging and witty advertising (hence our partnership with a brand and marketing agency).
- In the future we may carry out more radical marketing themes designed to draw media attention
Once we have established a certain brand awareness our preparatory work with our banking partners in getting their internal boards comfortable with our business we believe it should potentially lead to partnerships with their private wealth and client marketing divisions. Once we have a number of banking partners marketing our product to their networks of customers and clients this would lead to larger volumes in the future in addition to the retail and HNW investor base we capture from our own brand marketing.
At this time we believe we have no direct competition operating a web-based platform in our asset class and that caters for individuals. The closest platforms or products that compete with wiseAlpha are retail bond funds, blue-chip dividend stocks on the FTSE 100, large cap equity income funds or Peer-to-Peer small and medium business loan investments. We believe that our asset class of secured corporate loan and bond investments is a superior alternative.
In order to compete with these alternatives we plan to focus people in our marketing efforts on the brand and large established nature of the companies on our platform in addition to the limited price volatility versus equities.
With returns on wiseAlpha now comparable and in some cases better than returns on the closest peer platforms such as Funding Circle once we have established our presence alongside other marketplace lending platforms in the press this will draw more investor attention to us.