24th February 2017
When looking for investments, many investors will look almost instantaneously at traditional investments as a solid, reliable investment strategy. However, in the current low yield environment, it’s hard to generate real returns, especially when taking fees of the traditional investment forms into account.
Expensive – They generally tend to be expensive with fees loaded at the front end and often have trailing annual fees, regardless of performance. The fee structure is usually opaque.
No control – as an Investor, you can’t generally directly where your money is invested, and are left to rely on the discretion of the investment managers.
No risk – No Returns – Deposits are low risk and often relied on for income. However, depositors hardly earn any returns, or worse, taking inflation into account, you may actually be getting negative returns – in other words, the savings actually end up costing you money instead of making you any money.
Alternative investments like Huddle capital have been increasing in popularity since 2005 as more investors and financial advisors have begun to explore investment options outside of the traditional stocks and bonds.
So, why are so many investors turning to alternative investment opportunities?
Short-term traditional investment options often requires high amounts of turnover, which then leads to high transaction costs. Although short-term investments have at times been known to yield high returns, many of the benefits are offset by the costs associated with maintaining and rebalancing a portfolio.
As alternative investments have a wider universe in which to invest and do not have the same investment constraints, alternative investments therefore, have the potential for higher performance than traditional investments, taking account of the risk profile that often underlie alternative investments.
Alternative investment providers understand what doesn’t work in the traditional market and are going out of their way to ensure they improve on the customer experience. They are likely to be more open, responsive and quicker at meeting the needs of their clients. For example, an SME loan can be approved in as little as 2 weeks compared to the months that traditional banks’s usually seem to take – that is if they are willing to grant you a loan in the first case.
There are many types of alternative lending vehicles, not all of which offer advantages, or may be suitable for you. Take for example crowdfunding. This is a great alternative investment, however, it’s generally riskier and often very illiquid – in other words, you can’t sell your way out of the investment and payback is only possible when the company goes on to raise further funding or is willing to buy out your shares.
With the UK’s interest rates at an all-time low, business to business lending options like Huddle Capital can offer potentially higher yields compared with traditional loan based investments, simply because of the potential risks of small and medium enterprise. This market is also easy to tap into, because banks have left these borrowers out in the cold, creating significant gaps of opportunity for experienced lenders to step into.
As an investor, investing through business to business lending, you are in full control and can decide who you want to give a loan to. However, the job of chasing a debt is often taken care of by the business to business lending provider, operating through an electronic platform.
Huddle Capital is a groundbreaking business to business lending platform, with a difference. We place great value on educating you and informing you about this alternative form of investing, putting you in a position to make an informed investment decision. We’re also committed to bringing you high quality opportunities to lend to UK based SMEs, because we will meet and get to know every borrower who raises finance on our platform.