Bridging loan returns trumping wine and art

Research from West One Loans has indicated that bridging loans have provided investors higher annual returns than other alternative investments such as fine wine and art.

The short-term lender found that in the 12 months to 1 September 2015, private investors in short-term secured loans have seen a total annual return of 10.5%. This is over three times more than the 3.1% return from collectible art, and compares with negative returns for both gold and the FTSE All Share.

Wine investments are worth just 2.3% more than a year ago and are only just recovering from a two year slump, while investors in gold have suffered losses of 4.7% over the year to 1st September 2015.

Those who invested £500,000 in bridging loans on 1st September 2014 would now see their investment worth almost £553,000, while the same investment in fine art would have received significantly less value – about £515,000.

Meanwhile a £500,000 investment in fine wine would be worth just £511,000 as of 1st September 2015. If invested in gold, investors would have made a loss; £500,000 invested in 1st September 2014 would be worth just £490,000 as of 1st September 2015.

Duncan Kreeger, director at West One Loans, said: “The growing popularity of alternative investments is not without reason. Savers have lost patience with the rates on offer from banks and see greater potential returns from alternative investments. Investors are waking up to the full potential of alternative investments and bridging loans in particular, which consistently offer investors greater returns and stability than the likes of gold, wine and art.

“We expect this trend to endure as we continue to work closely with intermediaries to make sure that they are aware of the potential of the bridging market.”

However, West One Loans says that the finite lifespan of bridging loans and the problems investors face when attempting to dispose of some alternative assets is driving the popularity of bridging – quite apart from returns.

Stephen Wasserman, director at West One Loans, added: “A lot of the people investing in bridging loans with West One have tried investing in collectibles like fine wines, stamps, artwork, comic books, jewellery, and classic cars before. But they are becoming fatigued by the sales process and the problems of disposing of their investment at auction. They’ve been stung by commission that has to be paid to big houses and they’re been exposed to the associated pricing risks: starting the sale too high puts buyers off; starting low risks not reaching the desired price.

“This is not a problem faced when investors fund bridging loans. If you’re after an investor of passion, making investments as part of a hobby, you might enjoy the romance of the auction process. But the sophisticated investors we deal with are increasingly keen to dodge the fees and the associated risk. Once you throw-in the threat of fraudulent investment firms posing as investors in collectibles, liquidity risk, and exchange rate risk – the case for bridging becomes even clearer.”

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