London European Securities claims to offer “secure and protected” unregulated bonds paying 5.5% interest on Sterling investments for 12 months.
The company also offers investments in Euros and dollars, and over 6, 12 or “12+12” month terms. Rates are only disclosed when the investor provides their contact details, although in an August Facebook post, the company says it pays “up to 4.9%” on Euro investments.
London European Securities is regulated as an Alternative Investment Fund Manager in the UK, which does not amount to full FCA authorisation, with no entry on the FCA register. As such it is restricted on the extent to which it can market its services.
That didn’t stop the company entering a polo team in the Sandbanks beach polo tournament emblazoned with the number “5.6” on their shirts (the interest rate it offered at the time) to advertise its bonds in July 2019.
Funds raised from investors are used for commercial lending.
Who are London European Securities?
London European Securities is headed by Martin Young, who owns 100% of London European Securities Limited. The company was incorporated in November 2016.
Its last accounts (December 2018) show the company to be marginally solvent with £84k in net assets (£5.3m in assets and £5.2m in liabilities). LES took advantage of small-company exemptions and did not have the accounts audited or file a profit and loss account, so the accounts are of limited value for due diligence purposes.
Martin Young is the CEO of Meyado Group, a private wealth management company.
In his personal blog Young also refers to his history as “the CEO of Meretec Corporation which was a private equity deal where he commercialised the de-zinching of galavnised [sic] steel in plants built plants in East Chicago and Melbourne. After this company was sold Martin took over as CEO of Corsair Venture Capital Management a role he still holds today”.
The reference to Meretec being sold does not tell the full story; Meretec in fact went into administration. A number of investors who invested in loans or shares issued by Meretec lost their money as the sale did not raise sufficient funds to pay investors back.
How safe is the investment?
These investments are corporate loans and if London European Securities defaults you risk losing up to 100% of your money.
London European Securities claims to offer “secure investment” on the basis that when it lends investors’ money, it takes security on the borrower’s assets.
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).
We are not in any sense implying that the same will happen to investors in London European Securities, 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 London European Securities) to confirm that in the event of a default, the assets would be valuable and liquid enough to compensate all investors. Investors should not simply rely on what London European Securities tells them about their assets.
Should I invest in London European Securities?
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 a small unlisted 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.
As an individual, illiquid security with a risk of total and permanent loss, London European Securities’ loan notes are 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 corporate loans with a risk of 100% loss.