If you are an income-starved investor, could you say no to a “5pc guaranteed sterling bond”? I suspect many would find the combination of annual interest of 5pc and a guarantee highly attractive.
This is what is on offer from a firm called Burford Capital, which makes its money by financing legal cases.
But if you take up the offer, are you really guaranteed to receive 5pc interest for the term of the bond, which is nine-and-a-half years?
The short answer is no.
The supposedly guaranteed bonds are simply “retail bonds” issued by Burford. Just like any company that issues corporate bonds, if it goes bust the bondholders stand to lose all of the interest and capital they were due.
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