We review Fluid ISA’s IFISA bonds paying 6% per year

Fluid is offering IFISA bonds and unregulated bonds paying 6% per year for a three year term.

Funds raised are to be used to invest in short-term bridging loans.

Who are Fluid?

Fluid is currently raising funds in its subsidiary Fluid ISA Bond 2 Limited, within an ISA wrapper provided by Goji Financial Services. Previously it was raising funds via Fluid ISA Bond, with the ISA wrapper provided by Northern Provident Financial. Both companies will lend on the funds to Fluid Lending Limited.

The ultimate holding company is Fluid Trust plc which is owned 100% by Fluid’s Managing Director, Ansar Mahmood. According to the brochure, Mahmood has entered the bridging loans industry after 15 years as a chartered accountant.

How safe is the investment?

Fluid’s brochure makes much of the fact that its bridging loans are secured on property.

However, investors are not investing directly in secured loans, but in loans to Fluid Lending Limited, which in turn uses the money for secured loans. These loans to Fluid Lending Limited are not secured (there is no indication that they are in the investment literature, and Companies House shows no charges against Fluid Lending Limited at time of writing).

In any case, secured lending on property is not risk-free as there is a risk that if the underlying borrower defaults, the security cannot be sold for enough to cover the loan.

Investors in asset-backed loans have been known to lose 100% of their money when it turned out that there were not enough assets left to pay investors after paying the insolvency administrator (who always stands first in the queue).

We are not in any sense implying that the same will happen to investors in Fluid, only illustrating the risk that is inherent in any loan note even when it is a secured loan.

If investors plan to rely on this security, it is essential that they hire professional due diligence specialists (working for themselves, not Fluid) to confirm that in the event of a default, the assets of Fluid would be valuable and liquid enough to compensate all investors. Investors should not simply rely on what Fluid tells them about their assets.

Customer service

I don’t usually dwell on standards of customer services because it’s virtually irrelevant. The only time someone investing in a three year bond should need to deal with customer services is when they hand the money over and when they get paid back.

There is no other reason to contact them, unless they’ve changed their address or other details, or something’s gone wrong.

Nonetheless it is worth noting that Fluid pays particular attention to customer service. It has 55 reviews on Trustpilot and in almost every case, the company has taken time to personally reply to the review.

I will leave aside the question of whether “an OAP with limited funds” with a cautious attitude to risk should be investing in an inherently high risk loan to a single company, as I’m not in a position to second-guess their investment decision.

Given the emphasis Fluid places on customer service, it is worth emphasing that customer service has absolutely nothing to do with the likelihood of a company successfully repaying its debts. No investor in Fluid has yet reached the three-year maturity date so reviews say absolutely nothing about the likelihood of Fluid repaying the money on maturity.

Should I invest in Fluid?

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 individual loan note to an unlisted startup company, 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.

As an individual, illiquid security with a risk of total and permanent loss, Fluid’s loan notes are much higher risk than a mainstream diversified stockmarket fund.

Before investing investors should ask themselves:

• How would I feel if the investment defaulted 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?
• Have I conducted due diligence to ensure the asset-backed security can be relied on?

If you are looking for a “secure” investment, you should not invest in corporate loans with a risk of 100% loss.