A growing number of investors are moving into bridging because it offers higher yields than other alternative asset classes, and most traditional classes. To put it simply: it’s making people money. And that is great news for brokers. As more investors pile into bridging, brokers will have access to a wider source of funding.
The turmoil of the financial markets in 2011 will resound throughout history as one of the seminal periods in investments. It may well mark the point where investors turned their backs on traditional asset classes and took the less trodden path of alternative investments.
They are moving into these alternative asset classes, like bridging finance, which are safe havens compared to the choppy waters of the stock and bond markets. And it’s no wonder. The crisis in the single currency ransacked yields in most traditional asset classes last year.
Non-EU bonds, gold, and U.S equities were the only ones that yielded a positive return. UK equities returned a loss of 4%, and the average listed investment fund yielded a 5% loss. The FTSE 100 fared even worse.
It was hit by a series of geopolitical shockwaves from the eurozone, and fell 6.5% in 2011. It crumpled to a low of 4935 in mid-August, and was blighted by volatility throughout the year. Even equities in emerging markets were badly hit.
These booming markets were heralded as an El Dorado for investors, but even they couldn’t escape the clutches of the global downturn, as they returned a loss of 18%. Equities admittedly rallied slightly in December, but the overall trend for 2011 was investors scampering to move their portfolios away from the shockwaves hitting the western stock markets.
And the situation is unlikely to improve in the short or even medium term. Can we look forward to a bull market in 2012? Probably not!
The latest round of quantitative easing this spring won’t be on a big enough scale to jump start the economy and increase demand for stocks. Spending cuts will begin to bite 2012, and a mild recession appears imminent.
That’s why investors are moving into bridging. As an asset class it is sheltered from some of the more violent weather of the financial. On top of that, it yields a higher return than other alternative asset classes like real estate, hedge funds, and natural resources. Investors who put their money in West One Loans will get strong monthly returns, which compare favourably to struggling traditional investments.
Investors can be confident that demand for bridging finance is extremely strong. Demand for loans is astronomical, and will continue to push towards the stratosphere in 2012. Strong returns in buy-to-let are encouraging more landlords to take out bridging loans to finance their projects. As well as taking out more loans, they are taking out bigger loans. That is great news for investors and brokers alike.
And, importantly in the current climate, investing in bridging is more secure than betting on the vagaries of the stock market because Investors have their money secured against a property. Bridging lenders will generally force the borrower – not the investor - to cover the cost of a loan going into default.
There is no chance of investors losing their capital, or the interest they get from the loan.
So instead of trying to navigate their way through the turbulent financial markets, investors should be shifting their portfolios to the calmer winds of alternative asset classes. Brokers will certainly be hoping so.
DK.
