Bridging the wholesale – retail divide

Most industries have a supply chain from the distributor to the wholesaler to the retailer to the consumer. At each stage the minimum quantity gets less until at the consumer end they can buy a single item.

The problem with financial services is that sometimes the consumer does not actually get the same product as the wholesaler sells.

The retailer often repackages it in a different format and gives the consumer something else. In the case of direct bonds, the consumer most frequently ends up with a mutual fund and no way to get a bond.

Improving the structure of bond markets for smaller investors is our primary goal. Retail investors suffer because they pay much higher prices than institutions do and rarely have access to the same securities. This differs from equity markets where every investor, large or small, can buy a share of Apple Inc at the same price at the same time. By “retailing” through co-ownership wholesale corporate bonds, which tend to have minimum subscriptions of £100,000 that’s obviously a deterrent to private investors, we are opening the market to more investors.

Even for wealthier investors the onerous capital outlay to buy a single wholesale bond results in a lack of ability to diversify. Subscribing for smaller lots allows retail investors to enjoy the benefits of yield/return certainty that comes with investing directly in corporate bonds yet still enjoy the diversification benefits too.