One in five UK Investors are considering debt investment as an attractive option to receive high and regular returns over the year. However, out of those, 44% are focusing on short-term investments due to political and economic uncertainty caused by Brexit.
At least, that is what a survey, commissioned by FJP Investment, among more than 950 UK investors has found. In it, a 9% of investors surveyed said that they currently held some form of debt investment, 20% are considering this investment type within the 2019/20 financial year – this figure rises to 34% among investors aged under 35. The question here is, why investors are moving to debt investment in a moment of great instability?
The answer is found in the survey and it is a mix between investment strategies and supporting the country’s economy. As found in the survey, three in ten (30%) see the main strength of debt investment as its ability to deliver regular, fixed returns. Currently, the low 0.75% base interest rate makes debt investment an attractive option for the money they have in savings. That’s why 44% of them said debt investments appeal to them as they can provide short-and medium-term returns at a time when they are reluctant to make long-term investments due to the political and economic uncertainty caused by Brexit.
Jamie Johnson, CEO and Founder of FJP Investment, commented on the results: “Debt investment presents many benefits, particularly amidst low interest rates and Brexit uncertainty, as our research shows. It can provide regular returns over several years, which will attract those keen to make their money work harder without committing to long-term investments.
On the other hand, two fifths (40%) of investors see debt investment as a positive way of supporting UK businesses in need of capital but who are unable to turn to institutional lenders.
“At the same time, debt investment – and specifically peer-to-peer lending – is playing an important role in decentralising and democratising the loan market. It is enabling organisations to access capital from new sources if traditional lenders are not available or appropriate for them,” added Johnson.
Key points:
- 36% consider debt investment as an attractive option for achieving higher returns for the money they have in savings, with interest rates lingering at just 0.75%
- 44% are focused on short-term investments due to the political and economic uncertainty caused by Brexit – this rises to 68% among those aged under 35
- 20% of UK investors are considering making a debt investment in the 2019/20 financial year – this figure rises to 34% among 18-34 year olds
- However, 67% of respondents said they remain wary of debt investment amidst fears that borrowers will not be able to make their repayments
Talking about investor sentiment, the survey found that 35% said they think debt investments are simpler than other asset classes because there are no complicated exit strategies to contend with.
However, FJP Investment’s research revealed that investors’ main concern regarding debt investments is the ability of the borrower to repay the loan. Two thirds (67%) of respondents said they are wary about this type of investment because of fears the recipient of the capital would default on their repayments.
“Debt investment has become more popular over recent years, yet many investors remain wary of it”, continued Jamie Johnson. “Such concerns are perpetuated by investment providers not conducting thorough due diligence of potential borrowers to ensure the risk of defaulting is as low as possible.”
Hernaldo Turrillo is a writer and author specialised in innovation, AI, DLT, SMEs, trading, investing and new trends in technology and business. He has been working for ztudium group since 2017. He is the editor of openbusinesscouncil.org, tradersdna.com, hedgethink.com, and writes regularly for intelligenthq.com, socialmediacouncil.eu. Hernaldo was born in Spain and finally settled in London, United Kingdom, after a few years of personal growth. Hernaldo finished his Journalism bachelor degree in the University of Seville, Spain, and began working as reporter in the newspaper, Europa Sur, writing about Politics and Society. He also worked as community manager and marketing advisor in Los Barrios, Spain. Innovation, technology, politics and economy are his main interests, with special focus on new trends and ethical projects. He enjoys finding himself getting lost in words, explaining what he understands from the world and helping others. Besides a journalist he is also a thinker and proactive in digital transformation strategies. Knowledge and ideas have no limits.
