Kenton Finance is currently offering two unregulated “accounts” (actually corporate loan notes):
- Standard Account: 2 year investment paying 5.82% per year on a monthly basis
- Silver Account: 3 year investment paying 9.96% per year on a quarterly basis
Investors’ funds are used to supply bridging loans to property developers.
The loan notes are currently being promoted by unregulated introducers to their mailing lists.
Who are Kenton Finance?
Kenton Finance is headed by self-confessed “likeable loony” Kenton Hackney.
Hackney divides his time between bridging loans and being a wine merchant. Hackney’s LinkedIn page does not mention Kenton Finance but does list him as MD of 3squireswines and director of St James Winery (which appears to be defunct).
Kenton Finance is a trading name of KKH Holdings Limited. While the company was incorporated in 2015, Kenton Finance’s website was only registered in November 2019. The accounts to November 2018 show net assets of -£1,584 on gross assets of £182k, but in November 2019 net assets jumped to £6 million, mainly due to an injection of share capital. The accounts reveal very little useful information due to Kenton Finance using small-company exemptions, but they paint a picture of a company that only recently ramped up its activity in late 2019, notwithstanding its being incorporated in 2015.
The company claims in press releases to have lent out a total of £375m which is very different from the picture painted by its statutory accounts.
How safe is the investment?
Kenton Finance claim to offer a “great rate for your savings” and to offer “Full bricks and mortar backed security”.
In reality, as with any loan to an unregulated individual company, Kenton Finance is an inherently high risk investment with a risk of up to 100% loss.
The company claims a “100% TRACK RECORD of repaying external investors all their capital and interest” but does not make clear that past performance is no guide to the future. A 100% track record is meaningless as a) if they had defaulted on even one investor, they would likely be in administration and not soliciting new investment from the public b) Kenton Finance’s accounts suggests it has only recently had any substantial external investment.
Secured lending 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).
This is not in any sense to imply that the same will happen to investors in Kenton Finance, 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 Kenton Finance) to confirm that in the event of a default, the assets of Kenton Finance would be valuable and liquid enough to compensate all investors. Investors should not simply rely on what Kenton Finance tells them about their assets.
The disconnect between the 2 year and 3 year rates on offer is bizarre. You would normally expect a much narrower gap between the rates on a 2 year and 3 year investment. For the rates to be fair to 2 year “standard” investors, there would have to be a much higher risk of the company defaulting in year 3 than years 1 and 2. Why this would be is unclear.
Should I invest in Kenton Finance?
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.
Any investment paying up to 9.96% per year is inherently extremely high risk. As an individual, illiquid security with a risk of total and permanent loss, lending money to Kenton Finance is 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 unregulated loans with an inherent risk of 100% loss.