Another retail bond hits the streets, this one distinctly more esoteric than previous offerings. Naked Wines, which raises money from wine enthusiasts to fund independent winemakers worldwide, has launched a three-year bond aiming to raise £3 million from investors.
The Naked Fine Wine Bond will pay gross annual interest of 7% in cash, or 10% to those investors who prefer to take wine credits that can be used to purchase wine through the company. Between £500 and £10,000 can be invested.
After three years, investors have a number of choices. They can have their initial investment returned in cash, or again opt for wine credits in lieu of cash, in which case they will receive a 10% uplift.
Alternatively, they can leave the cash invested and continue to earn the same gross interest, with an annual option to redeem the investment on future anniversaries.
Naked Wines operates by reinvesting monthly £20 contributions from individual 'Angels', of whom there are now more than 120,000, in selected winemaking enterprises. In return the Angels get reduced prices on wine sales.
"But ultimately fine wines require more time to mature, meaning we also need a longer-term source of funding in order to give the winemakers the financial assistance they need," comments chief executive Rowan Gormley.
"Investors in the Fine Wine Bond will benefit from an attractive rate of interest along with the opportunity to acquire a premium product competitively priced."
Ben Willis, an IFA with Whitechurch Securities, says the key risk is of default. "The money is being used to invest in independent fine winemakers, not big well-established firms. What happens if one of them defaults?" he adds.
He believes it's a niche investment suitable for a small flutter. "It's really a play for people who like wine and are interested in the chance of taking returns that way, or want to access a decent income, or sophisticated investors looking for a bit of diversification. It's not comparable with the likes of retail bonds such as Severn Trent."
This article was written for our sister website Money Observer