Hanover Merchant Capital is offering the opportunity to invest in lease-back contracts for the delivery of mineral water from an aquifer in New Zealand, which pay “annuity type” income of “5.29% guaranteed” each year. After two years, the contract is sold for which Hanover Merchant Capital projects “up to 30% aggregate capital return”, with the caveat that this is “subject to market prices”.
In email promotions, the investment is promoted as offering “NO Capital Depreciation” and “Secure Underwritten Investment”.
Who is Hanover Merchant Capital?
No details are provided on hanovermerchantcapital.co.uk as to who is behind the business.
Hanover Merchant Capital was incorporated in Switzerland in 2016 as Hanover Merchant Capital AG. The Swiss company registry shows that the two “registered persons” were chairman Tahar Keddech (who in May 2018 appears to have been removed as a registered person) and director Michael Gassner.
Hanover Merchant Capital was also incorporated in the UK in December 2015 as Hanover Merchant Capital Limited. The company is 100% owned by Bruce Rowan.
How safe is the investment?
These investments are unregulated commodity contracts and if for any reason Hanover Merchant Capital defaults on the promised payments of 5.29% each year, and Hanover Merchant Capital is unable to find a buyer for your water contract, and cannot make good on its “NO Capital Depreciation” promise, you risk losing up to 100% of your money.
The investment Hanover Merchant Capital is offering is a contract to deliver bottled mineral water from New Zealand. Hanover Merchant Capital says “we trade the water units on a matched bargain basis market trading with buyers and suppliers for physical delivery and transport”.
Commodities are in general an extremely volatile investment. Contracts to deliver bottled water are no exception.
As with any commodity, in 2 years’ time the contracts to deliver this water will only be worth what someone will pay for them. If Hanover Merchant Capital is unable to find a buyer for your water, you risk losing up to 100% of the money you handed over to buy the contract.
Hanover Merchant Capital’s promise of “no Capital Depreciation” is only as good as the company backing it, in this case presumably Hanover Merchant Capital. No details of Hanover Merchant Capital’s financial strength are provided in the investment literature.
Very little mention of these risks is made by Hanover Merchant Capital. The literature also states the investment offers “annuity type income”. Annuities, at least from a UK perspective, are insurance contracts which are guaranteed by regulated insurers who have to meet solvency requirements, and receive 100% protection from the Financial Services Compensation Scheme. Hanover’s water investments are unregulated and have no FSCS-protection.
Illegal financial promotions
Providing financial promotions in the UK requires the company to be regulated by the Financial Conduct Authority.
In their “About us” page, Hanover Merchant Capital claims
The origins of the company started over a decade ago (at the time regulated by the FSA now the FCA) dealing as a financial investment house for private equity clients based in the city of London and the Isle of Man but due to growth and expansion the company merged the private equity division with an International Fund Management company and de-merged the property group which today consists of HMC Holding AG (subsequent FSA regulation was transferred with the equity business separating from the property group). The company de-merged the commercial and residential property asset management portfolios in 2009.
I have read this ludicrous run-on sentence twice and I am still none the wiser on where the FCA/FSA regulation is supposed to have been transferred to – Hanover Merchant Capital in its present incarnation or the other unspecified business(es) which were de-merged from this incarnation.
The UK, Swiss and Liechtenstinian registries show that neither Hanover Merchant Capital Ltd, Hanover Merchant Capital AG nor HMC Holding AG (a company registered in Liechtenstein) existed prior to 2015/2016. Nominet shows that http://www.hanovermerchantcapital.co.uk was registered in August 2016. Hanover’s waffling on about mergers and de-mergers with unnamed companies does not change the fact that there is no concrete evidence that Hanover Merchant Capital existed prior to 2015, much less 2009.
Hanover Merchant Capital does not provide an FCA registration number on its website, nor does it disclose its regulatory status in emails. A search for both Hanover Merchant Capital and HMC Holding on the FCA register provided no results. The inescapable conclusion is that Hanover Merchant Capital is offering financial promotions despite being unauthorised to do so in the UK or any other country in which it operates.
Under the Financial Services and Markets Act, it is a criminal offence for an unregulated firm to offer financial promotions to the UK public.
Should I invest with Hanover Merchant Capital?
This blog does not give financial advice. The following are statements of publicly available facts or widely accepted investment principles, not a personalised recommendation. Investors should consult a regulated independent financial adviser if they are in any doubt.
As with any unregulated investment into individual commodity contracts, this investment is only suitable for sophisticated and/or high net worth investors who have a substantial existing portfolio and are prepared to risk 100% loss of their money.
Any investment offering 5.29% per annum yields plus a projected 30% return after 2 years (a total projected return of 19.3% per year) should be considered extremely high risk. As an individual security with a risk of total and permanent loss, Hanover’s water contracts are higher risk than a mainstream diversified stockmarket fund.
Before investing investors should ask themselves:
- How would I feel if Hanover was unable to find a buyer for my water contracts, pay the promised 5.29% returns or back up its “NO Capital Depreciation guarantee”, and I lost 100% of my money?
- Do I have a sufficiently large portfolio that the loss of 100% of my investment would not damage me financially?
If you are looking for an investment which guarantees “no capital depreciation”, you should not invest in unregulated investments with a risk of 100% loss.