We, at The Money Principle, are great fans of ISA investing and we don’t make a secret of that. We still believe that ISAs are a good investment and we take full advantage of the tax benefits these offer.
Only the other day we published our guide to stocks and shares ISA investing to help you navigate the intricacies of this investing instrument including little know ISA rules, ways to select the ISA, and the ISA provider, for you and the risks that ISAs carry.
Today, with the deadline for ISA investing within the current personal tax year rapidly approaching, we share our review of an IFISA-Wrapped Bond we refer to as Raptor ISA investment.
What is Raptor ISA investment or IFISA Wrapped Bond?
Raptor ISA is an Innovative Finance ISA wrapped bond started as a suite of three IFISASs by Robert Rutter: an ex-Merrill Lynch Senior Private Banker with over 35 years of experience.
This ISA allows investors to access precious metals mining investment opportunities by investing in the Raptor Bond. Ultimately, the money you invest in Raptor Bond ISA will be used to finance (relatively) early stage third party mining projects specialising in gold and other precious metals.
What is the ROI on Raptor IFISA?
The ROI that is being publicised by Raptor Bond ISA is 8% per year. Unfortunately, as is the case with all IFISAs, it is not possible to trace this historically – these ISAs were established only recently. Returns depend on the terms of the bond and these may change.
What are the fees for Raptor IFISA?
Raptor ISA uses bonds. If you are not sure about it, please learn more about bonds; it suffices to say that bonds are widely used by governments and corporations to borrow money.
There is no fee for investing in the bonds.
You will, however, incur the following Raptor ISA management fees:
Can I withdraw my money when I need it?
No. Investing in the Raptor Bond ISA is fixed for three years. While it may be possible in exceptional circumstances to withdraw early, please remember that bonds may be difficult to sell.
Can I invest in Raptor IFISA and other ISAs in the same year?
Yes, you can.
Remember that one of the little know rules of ISA is that you can split your annual allowance (currently £20,000) between the following:
- Cash Isa;
- Investment (stocks and shares) ISA; and
- Innovative Finance ISA.
You can’t invest in more than one Innovative Finance ISA during the same tax year, however. In other words, you cannot invest in the House Crowd ISA and Raptor ISA in the same personal finance tax year.
How risky is Raptor IFISA?
Any investment carries risks, you know that. ISAs are no exception and these carry different kinds of risk.
One group of investment risks to which the Raptor ISA is exposed are external and are about general development in the economy, political developments, terrorism and generally, disturbance. These are outside the control of the company offering Raptor ISA.
Another risk group is about the nature of bonds (lack of diversification), selection of companies, their performance etc.
And a third group of risks is about the viability and stability of the company behind Raptor ISA.
What also would increase the investment risk, I believe, is that the company behind Raptor ISA is not covered by the Financial Services Compensation Scheme. This means that if the company fails, you won’t be able to claim compensation.
How much money I need to open a Raptor IFISA?
The minimum investment to open a Raptor ISA is £2,000.
How does Raptor IFISA compare with other ISAs?
Here is how Raptor ISA compares with Cash ISA, Investment ISA and Innovative Finance ISA (peer-to-peer) according to:
Returns. Returns on investment.
Risk level. Risk to your investment/savings.
Fees. How much are the fees of the ISA?
Predictability of returns. How predictable are the annual returns of your investment?
Diversity. How diversified is your investment?
Effort. Effort required from you.
|Cash ISA||Investment ISA||IFISA (peer-to-peer)||IFISA (Raptor IFISA Wrapped Bond)|
0.5% to 2%
|Depends, could reach 10-15% on some funds||
4% to 8%
|Fees||Charges for early withdrawal and for transfer
|Between 0.8% and 4.7% of amount invested*||Charges for early withdrawal||Low, fixed charges for specific actions|
|Predictability of return||High||Low||High||Medium|
|Low to High depending on account||Low||Low|
The Money Principle Verdict…
In this review of Raptor Bond ISA, I presented its key characteristics.
Ideal ISA = (Relatively) low risk + high (potential) returns + low fees + high diversity
I’d say that Raptor ISA is not likely to feature prominently in my ISA portfolio of investments. This is mainly because I consider it to carry more risk than other IFISAs with lower level of inbuild diversification.
Raptor ISA is worth considering as a complementary arrangement under two explicit conditions: a) you won’t need to access in the next three years; and b) you invest only as much money as you can live without.
Still, there are things about Raptor ISA that I found very attractive and others I am not too keen about.
What are the things I like about Raptor IFISA? Here are the three top ones:
#1. Raptor ISA is set to yield a return of 8% per year. This, in simple terms means that, hypothetically speaking, if I put £10,000 in a Raptor ISA this year, in three years I’ll have £12,400. Imagine creating ‘bond stairs’ (e.g. investing in Raptor ISA every year for a number of years).
#2. I like the predictability of return. Yes, things can go wrong. Still, if they don’t the return is predictable.
#3. I find the fact that my money will be used to mine gold and other precious metals exciting. Yes, I like gold and like gems. Unfortunately, this excitement comes tinted by alarm bells about working conditions etc.
What are the things I would watch?
#1. Having my investment tied up for three years. I have been aiming to maintain, and grow, liquidity in my portfolio and appreciate having access to my cash. Not being able to withdraw cash for three years can be offset by careful planning.
In conclusion, I believe that Raptor ISA investment is a very interesting development. Still, it is not an investment that is good enough to tempt me; hence it is not something I’d consider as a core part of my ISA portfolio.