Company profile: Abundance Investments
Investments meant for greater good and carrying no negative baggage until a few years ago were nowhere to be seen in the public domain. If, as an individual you cared about the environment all you had was your back garden, your local community initiatives and some times an independent financial adviser who may have brought you an opportunity to invest – but that was about it. Fast forward to today, Abundance is bringing investors opportunities to add to their portfolios straight from the source, democratising it and providing direct access to help them do their bit.
Founded in 2009 by Bruce Davis, Louise Wilson and Karl Harder, Abundance Investment today has fifteen employees and are based out of London and at https://www.abundanceinvestment.com. They cater to the entire retail segment offering peer-to-peer investments that are ethical and convey social responsibility. Abundance is authorised and regulated by the Financial Conduct Authority.
Abundance offers peer-to-peer (P2P) investment opportunities in projects offering social and environmental benefits. For the customer (seeking to invest) the idea is to build a portfolio by investing in the projects on a long-term basis. The long-term investment instrument offered are Debentures that are essentially a type of Bond. Their offering is unique in a way that one can focus on long-term goals and create an investment portfolio with not just an estimated return of 6-9% IRR but also generating a return for environment and society. This P2P investment concept is all about investing in social, ethical and environmental projects.
With current focus on renewable energy projects for P2P investments, Abundance was the first P2P investment platform to be regulated. Abundance funds renewable energy projects via the P2P programs. The way it works is that once a client decides that they want to invest for a term Abundance can find a project that meets those needs. The issuers of the projects have a key requirement of being registered as a PLC (Public Limited Company) in the United Kingdom.
In terms of the process, the issuer provides and is responsible for cash flow projections. Abundance has a team that carries out due-diligence along with an independent assessment from a Building Society. The project then outlines the amount it is raising, the IRR and calculator to calculate returns along with payment terms. There are options available either to reinvest or withdraw when the payments are made, typically twice a year. The beauty of the platform is that one can even trade the debentures and there is a free bulletin board service allowing potential sellers to list their debentures for sale to other members on Abundance platform.
The products have a long-term horizon and also focus on the ethical and social side of investments. The investment opportunities are available to UK residents, residents of countries in EEA and Switzerland but US citizens are excluded. The offering is designed for retail customers and is available to everyone who is above the age of eighteen.
The end-investor is not charged any fees for investing. Abundance earns their revenue on the total amount invested in a project. The fees as available on the current projects that are raising money is circa 150 basis points for annual administration plus a 4-5% charge as a setup fee on the amount raised. The structure of Abundance revenue model is one of annuity revenue and is designed to create sustainable revenue.
The Intrinsic Value
One of the founders Bruce Davis said their products are like ‘reverse mortgages’, more importantly it is to build something for the greater good. When one looks at the democratisation of the investment vehicle, in terms of the structure, soundness and safety this probably comes closest to being the safest.
With the launch of ISA (Individual Savings Account) and SIPP (Self Invested Pension Plan) platforms planned on the product roadmap again geared towards ethical investing along with the existing offering, Abundance certainly offers incremental investment options. The idea of using ISA and SIPP as incremental instruments will certainly make the issuer pots fill faster. To the customer this will give a way to invest in something with consistent returns, especially the SIPP offering.
Abundance has not displaced anything. What it has done is provided more options to the investors who seek to stay away from listed instruments and care to invest in a socially responsible manner. It has brought about a change by adding socially responsible investment options along with issuers getting a chance to demonstrate their good work be it local councils or providers of clean electricity to power UK homes.
The Profitability Conundrum
Abundance Investment – doing (well) by doing good. They are certainly doing a lot of good. The (well) in parenthesis is indicative of profitability or lack thereof. In the three years that Abundance has been operational they have raised circa GBP 15 million and returned to investors GBP 1,2 million in the 16 projects that have been funded. Clearly, the end-investor is benefitting so are the issuers. How Abundance will make profits is more of a supply issue of projects that are seeking funding. They are in a unique niche and it is all about project supply if they do not want to burden the investor seeking ethical investment.
The concept and the model that Abundance has created is here to stay. Broadening the product suite to include SIPP and ISA are the steps in the right direction. At a conceptual level the Debenture offer on social and renewable energy projects are products that perfectly compliment each other. Their placement in the value chain by offering green products with consistent returns is playing to the many retail investors tune.
So, is there a problem? How much has Funding Circle raised in the last twelve or eighteen months? Possibly a lot more than Abundance. Why? Reason is straightforward – lack of supply of the projects that need funding. On the other hand the investment channels need a bit of scrutiny and a partnership model with financial advisers, wealth managers or even with a crowdfunding platform (thinking a bit out of the left field) will help Abundance reach the true potential.
Their ability to go to the next level will rely on a possible partnership model, the demand generation for ISA and SIPP and just based on the intent of the model, they would do well to succeed. Abundance has created a good model for doing good, hope they are not too early.
Abundance was created to democratise finance and bring investment to the people who need it – small investors looking to make a return on their money and do something positive for the world they live in.
The last 6 years have been an incredible journey from achieving the world’s first regulatory approval to record breaking raises for wind and solar projects and now the launch of our pension and soon to be launched ISA products. As such we can say we are on the cusp of achieving our goal to bring investment to people that is appropriate for small investors and helps their money match their values for a decent profit.
We see a bright future for extending the Abundance franchise beyond renewables and opening a world of win win investments for our customers.
Disclaimer: This material is for informational purposes only and should not be construed as research or as investment advice, nor should it be considered information sufficient upon which to base an investment decision. Further, this communication should not be deemed as a recommendation to invest or not to invest.
The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete in its accuracy and cannot be guaranteed.
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