14th April 2021
Since the Innovative Finance ISA was first launched in 2015 (a tax-free investment opportunity up to £20,000 annually aimed to help British business grow), the industry has developed more offerings to cater for growing demand and a growing number of sophisticated investors. There’s now more choice than ever before as to the businesses and entrepreneurs the public can choose to support with their IFISA investments, with ever-more investment platforms offering to help them do this.
The two main categories
IFISA investment platforms are now broadly split into two categories. Direct Investment - when you invest directly into businesses of your choosing, or Pooled Investment - where your funds are distributed to an assortment of businesses on your behalf
If you’re an investor looking for freedom of choice and playing a more engaged role in your investments with high levels of personalisation and diversification, Direct Investment could be the right route for you. Pooled Investment on the other hand, offers greater convenience - with investment professionals placing and managing your funds for you and shared loss risk. Willing to take on more risk for higher returns? Great. Prefer more security and happy to take a lower rate of return to allow for this? Totally understandable. When it comes to your money and your investments, it all comes down to your personal preference and what’s right for you.
Read on to get a better idea of what might work for you and why Crowd2Fund operates the way we do.
Direct Investment IFISAs with Crowd2Fund
At Crowd2Fund we specialise in Direct Investment IFISAs - providing ease of access to investment opportunities in some of the UK’s most exciting new businesses and also giving our investors greater powers of freedom and control as to where their funds are placed. Our sophisticated tools enable our investors to take part in both high-engagement personal fund management, or alternatively, take advantage of our more hands-off ‘Smart-Invest’ intelligent automation tool.
With most Pooled Investment platforms, you generally can’t tailor your IFISA investments to your own existing personal portfolio because the investment sectors are generally so broad - however, as mentioned above there are benefits including dilution of losses and having your finances managed for you. When you invest directly you can select businesses that fit your own portfolio from a business type perspective and also from a risk profile perspective.
Leaning towards Pooled Investment?
If you’re drawn towards a more Pooled Investment approach, Crowd2Fund still has something that might interest you. Our AI-powered robo-investor ‘Smart-Invest’ automatically and intelligently lends your funds to businesses that match your risk appetite and personal preferences - taking the pressure off you day to day. The benefit here, as opposed to most straight-up Pooled Investment funds, is that you’re still able to review the underlying businesses and sell the loans on the Crowd2Fund exchange. This combination offers more transparency, flexibility and liquidity than most pooled-fund providers.
If you’re looking for industry diversification, Direct Investments offer an incredibly broad range, including some industries you might already understand on a personal, or professional level. For example, that might be a business like Cubana who were looking for funds to open another restaurant, or, it might be Planks, an eco-friendly skiwear brand looking to launch a new collection.
When it comes to risk profile, Crowd2Fund offers a variety of capital choices to the businesses that list for investment on the platform. If you have a higher risk tolerance, you might be open to investing in venture debt opportunities, with rates of at least 15%. Or, if you’re looking for something lower risk, you could engage in one of the more established businesses, with rates starting from 9%.
Explore your investments in detail
With a Pooled Investment platform, you generally can’t perform personal due diligence on the underlying companies you’re investing in. Direct Investments offer more detail, more transparency and the opportunity to ask questions. Each business listed on Crowd2Fund includes links to the LinkedIn profiles of the directors, open Q&A and necessary operating financials for the business. This additional detail gives you the opportunity to engage with and apply your own personal expertise to your investments. And, as an added bonus, your investments sometimes offer a tangible reward - something perhaps that can help you to understand or experience the brand as a consumer and can help amplify your direct connection with a brand or business as you help them grow. Taking our previous example of Cubana - their campaign offered direct discounts and free meals for investors, so you could experience and enjoy the brand personally and potentially see first-hand where and how your money’s being put to use.
Realise the true market rate
Crowd2Fund doesn’t have businesses underwritten by institutional investors, so the interest rate of each opportunity is determined by the market’s opinion of that investment’s creditworthiness.
Whether you’re using your £20,000 IFISA allowance for the first time this tax year, or you’re a seasoned investor looking to use up your allowance again, Direct Investments, with or without our Smart-Invest feature, offer a personalised, engaging and effective form of tax-efficient investing.
Past performance and forecasts are not reliable indicators of future results. Tax treatment of any of the investment offers will depend on the individual circumstances of each investor and may be subject to change in the future. If you are unsure about any aspect of the information provided by the company, you should seek advice from an independent financial adviser. Do not invest more than you can afford to lose. Investing in start-ups and early-stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. Investing in start-ups may expose the individual concerned to a significant risk of losing all of the money or other assets invested. Peer-to-business lending through Crowd2Fund is not the same as holding a bank or building society savings account. When making a peer-to-business loan, your capital lent to a borrower is not covered for compensation in the event of a loss by the Financial Services Compensation Scheme. It may prove impossible to recover all or part of the loan by calling in the business assets held as security on that loan. Reward and Donation funding types are not regulated by the Financial Conduct Authority Crowd2Fund Limited is authorised and regulated by the Financial Conduct Authority (FRN 623683). Crowd2Fund Limited is registered in England and Wales. Registered No. 08472687 Registered Address: 242 Acklam Road, London, W10 5JJ.
Past performance and forecasts are not reliable indicators of future results. Your capital invested is not covered for compensation in the event of a loss by the FSCS. Tax treatment will depend on the individual circumstances and may be subject to change. Please see our Risk section before making an investment decision.