Why Abundance offers debt based investments
Our approach to investments
Since our launch in 2012 Abundance has set out to take a different approach to investing, helping individual investors fund the essential energy and social infrastructure that we need to build a better future. At the time it wasn’t possible for individuals to fund green energy projects, with the only options available through investment funds with high minimum investment amounts, despite the fact that then (as now) many investors wanted to get their money working to fund a greener future. Our founders realised a new solution was required, which is when they decided to develop long term debt investments, called Debentures, to help solve the problem.
Why Debentures?
Debentures are still an uncommon investment, but we use them for very specific reasons. Debentures are debt based, meaning they are like a loan to the business, rather than investors taking a shareholding in the project itself. This feature is useful for both investors and the projects seeking funding.
From the investors’ point of view, a debt based investment can offer regular interest payments, unlike an equity investment where no fixed returns can be promised. This is because we work with projects with future cashflows (such as wind and solar farms, where income is generated from electricity sales), which makes these kinds of projects suitable for a debt based investment. Many of our Debentures offer regular repayments of capital and interest across the term, which is only possible because of their debt based structure, which can help our investors manage their portfolios and plan for a variety of financial goals.
We also chose Debentures because they offer a number of protections for investors compared to other options, such as peer to peer loans. When you invest in a Debenture on Abundance you have voting rights, which means you get a say in any changes to the terms of the investment in the event that an investment doesn’t go to plan. But as with any investment, there are still risks.
Focussed on Debt investments not equity
Other investment platforms offer equity investments in established and start-up energy businesses, which can also be a good way of funding new technology and innovations. We choose to focus on debt based investments instead, so the vast majority of investments you will find on Abundance will be debt based. This is not because we don’t see the value in equity investments, but simply because we want to offer our customers investments with regular cash returns. Over 71% of our customers are using their returns on Abundance to help them plan for particular financial goals, so it is important for us to provide a range of investments that offer predictable cash returns across the investment term.
Equity investments do have a part to play in a balanced investment portfolio, but debt investments give long term, regular cash returns, which help long term financial planning. We aim to offer a mixture of investments — short and long term, and a range of risk profiles — to allow our customers to build a portfolio that suits their individual goals, be that growth or income. We can only do this by offering debt based Debentures.
Risk warning
As with any investment product there are risks. Part or all of your original invested capital may be at risk and any return on your investment depends on the success of the project invested in. You should be prepared to hold Abundance investments for their full term and investments may not be readily realisable. Estimated rates of return can be variable and estimates are no guarantee of actual return. Specific risks will apply in relation to each product. Consider all risks before investing and read the Offer Document for each investment.
