Cesco Investments offers bonds paying 3.5% per year, according to its website.
I have seen online reports, since deleted, claiming investors have been contacted with offers of higher rates.
However, 3.5% is the rate quoted on Cesco Investments’ website (cesco-investmentsltd.com), so we will go with that. Few details are provided; a “Find Out More” link underneath the description of Cesco’s bonds doesn’t work at time of writing.
Who is Cesco Investments?
No details of who is behind the business is provided on Cesco Investments’ website.
Companies House shows that Cesco Investments Limited was incorporated in April 2007. However, ICANN Whois shows that the cesco-investmentsltd.com domain was only registered in September 2018. Cesco Investments Limited’s last accounts (April 2018) show assets of only c. £88,000 and creditors of c. £40,000, which for a company that claims to be a mortgage lender is virtually nothing.
Cesco Investments Limited has one director, Fausto Furlotti.
Cesco Investment claims on its website that it “has been built by an experienced team from a broad range of backgrounds who all recognised the enormous potential for new ideas in the mortgage and investment market”. This claim to have been built by “an experienced team from a broad range of backgrounds” is at odds with its latest accounts, which state that it had a single employee (i.e. Furlotti).
Furlotti’s entry on the FCA register shows that from 2009 to 2012 he held a CF30 customer-dealing role (CF30) at Hartmann Capital, also known as HartmannFX. Hartmann Capital went into special administration in 2013 after client money went walkabout; at time of writing it remains in special administration. There is no suggestion that Furlotti was involved with the disappearance of client money, and he was not a director of Hartmann Capital.
Since 2009 Furlotti has been a director of IMO Precision Controls Limited, an electronics business which has been going for 45 years. An article for the trade paper “Panel Building and Systems Integration” says Furlotti stepped down as CEO of IMO in September, though according to Companies House he remains appointed as a director.
I did wonder whether the IMO Precision Controls CEO Furlotti and the Hartmann employee/Cesco director Furlotti could really be the same person (given that these seem to be two full time jobs in very different industries), but the IMO and Cesco entries on Companies House show the same date of birth, which suggests he is.
How safe is the investment?
This is an investment into a newly trading mortgage lender and if Cesco Investments fails to make sufficient returns from its mortgage lending business, there is a risk that they may default on payment of interest and capital to investors.
Furthermore, Cesco Investments Limited’s entry on the FCA register state that it is not authorised to act as a mortgage lender.
Cesco Investments Limited has been FCA-registered since 2012, but its current permissions are limited to advising on and dealing in investments – and only on behalf of professional investors and eligible counterparties (i.e. it is not authorised to advise or deal with ordinary retail investors). Their list of authorised activities does not include entering into a regulated mortgage contract as lender.
Cesco Investments’ website claims that the company is acting as a mortgage lender (not a broker), despite not being authorised to do by the Financial Conduct Authority.
What experienced buy-to-let investors, high-net-worth* individuals and business owners need is lending with imagination. They need a lender that recognises cash flow and net worth are not the same thing. They need a lender that is flexible in how interest is serviced and that has the risk appetite to go where other lenders won’t venture. Cesco Investments Ltd is that lender.
This is your first major red flag.
Under the “Mortgages” section of its website, Cesco states “We no longer offer the Partnership Mortgage, Buy-to-Let Equity Loan or Index Profit Share Mortgage”.
I thought it was pretty odd that Cesco should have stopped offering three types of mortgage products when it’s only just commenced trading.
A quick Google search revealed the answer: the “Mortgages” section of Cesco’s website has been copied and pasted wholesale from the website of Castle Trust, which is an FCA-authorised mortgage lender (and whose loan notes have been featured on this website before).
Further comparison shows that almost every section of Cesco’s website, including the “About Us”, “Careers” and “Development Finance” pages, and its format, have also been copied wholesale from Castle Trust. After changing the business name, inserting Cesco Investment Ltd’s 2007 incorporation date, and removing the management biographies.
Should I invest in Cesco Investments?
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 corporate bond, 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.
3.5% per year is an extremely modest rate to offer for a bond that carries a risk of total loss, from a company that has only just commenced trading to any significant extent.
Most importantly, investors should think very carefully before investing in a company that is not authorised to conduct the business it claims to generate returns from, and copies and pastes its website from unrelated businesses (who are authorised).