Winterflood is pleased to have hosted a “roundtable” discussion for investment grade bond issuers and investors, to discuss proposals that could result in retail investors having access to corporate bonds in the primary and secondary markets. The session was chaired by Sarah Boyce of the Association of Corporate Treasurers (ACT) and James Leather of Corium Treasury. Four well-known large issuers (including two FTSE listed organisations, a housing association, and a privately owned infrastructure business) were invited to discuss opportunities and potential impediments to retail inclusion in the bond markets with three retail investors (all large UK based wealth managers).


On the investor side, the message was clear – they stand willing and able to get involved in the primary market, with considerable appetite for access to the secondary market. Investors expressed a preference for the market to return to how it was pre-2005 when most corporate issuance was in low denominations. The ongoing problem that investors face is that they can’t access new bonds because they are issued with high denominations and the population of outstanding low denomination bonds (issued before the changes in 2005) is in sharp decline. Investors cited low denominations as being important when building portfolios for individual investors. 


On the issuer side, the inclusion of retail via low denominations in both the primary and secondary markets was welcomed, as all could see the advantages of another source of liquidity, particularly as some existing sources are becoming saturated. Participants thought that if the proposed new rules enable retail inclusion via low denominations without adding cost or complexity, then this was positive. Issuers outlined that they have been put off by the prevailing rules which do require additional work. PRIIPS, introduced in 2018 but amended considerably in the UK in late 2022, was also cited as another reason why issuers have historically been put off from including retail. 


The idea of one bond market being open to all received widespread support. Both sides observed that this is how the market used to be and it functioned well. It was also outlined that over the last 20 years, market infrastructure has responded to the regulatory framework and as a result, wholesale execution is considered the easiest, quickest and least risk path for raising bond capital. 


“Moving back to one form of disclosure is welcome. Everyone gets that this is a good idea,” says Michael Smith, Debt Capital Adviser at Winterflood. “The elephant in the room though is whether advisors will support the proposals– changing attitudes to retail inclusion is the real challenge here. The argument goes that the market works fine without retail and so what’s the problem? This argument is becoming increasing less tenable – bonds are safer than equities, they have known cash flow profiles and they absolutely should be part of a diversified portfolio. Investors large and small are asking questions about why they are locked-out when their clients have access to much less appropriate products. It’s got nothing to do with there being no demand or bonds not being suitable for investors – largely, it’s down to the existing infrastructure being built around wholesale,

“Investors are just waiting for this to happen. Hopefully, we will look back in five years’ time, low denomination bonds will be the norm again and we will wonder what all the fuss was about. Winterflood is championing the proposed changes because our investors want access to the same bonds as wholesale investors – just like in the equities space.”


If you would like to discuss the article or topic in more detail, please contact: Michael Smith, CFA, Debt Capital Markets at Winterflood Securities