This article will review Empire Fixed Income Special Situations bond/loan note. And, explore how the offering can fit into your offshore fixed income investments portfolio.
We will also examine the track record of some of the directors involved in other ventures, after the news that an SPV managed by the same directors has gone into administration according to various media reports.
If you have any questions or want to invest as an expat or high-net-worth individual, you can email me (advice@adamfayed.com) or use these contact options. There might have more appropriate options for your needs.
This article is for informational purposes only, and nobody should invest or divest based on this piece alone.
We have done our best to make sure the information is updated, but you should do your own research to check that things haven’t changed, as we can’t guarantee that this article is completely updated.
Subsequent to the first article being published, we have done our best to show a distinction between Empire Fixed Income Special Situations, which hasn’t gone into administration, and Empire Property Concepts, which has.
Nevertheless, it does make sense to carefully look at the track record of the directors involved in Empire Fixed Income Special Situations.
What is more, coupons have been delayed for the Empire loan note, and many Empire clients are in other loan notes that can be high risk.
Ultimately, investing into loan notes always carries big risks, and you could lose all your money.
Given these facts, it makes sense to review your entire portfolio.
Empire Fixed Income Special Situations Corporate Bond Review
Firstly, what were the basics about this investment?
This investment is a bond/loan note. The investors are lending money for Empire to develop properties in the UK.
The focus is on ethical and socially responsible investing.
The minimum investment threshold is 20,000 Pounds, but investors needed to be high-net-worth, sophisticated investors or certified high-net-worth individuals to apply.
In other words, this isn’t supposed to be a retail investment, so most investors go through financial advisors and intermediaries.
Like other investments similar to this, the investors are risking their capital, betting that the investment returns will be there.
A few years ago, Empire released a two-year fixed income income product called the special situations corporate bond to the market, with returns between 11%-15% per year offered.
The loan note/bond is separate to the company that has gone into administration, but some of the directors are the same.
What are some examples of their projects?
Empire have invested in a lot of deprived areas in the UK.
Examples include Globe Works Bolton and Consort House Doncaster.
The picture below, from the Bolton News, shows the Bolton project.
What are the positives associated with this investment?
For a select few high-net-worth clients, the risk might seem worth it.
What is more, with ESG/socially responsibility investing now see as more important for investors, this project was seen as ethical by many.
The FCA-regulated security trustee also adds some basic protections, but in reality, this doesn’t mean that investors can’t lose money.
There have been many instances where an FCA regulated security trustee has been used and investors have lost out.
As the investments are asset-backed, moreover, a default doesn’t automatically mean clients lose money.
In the event of a default, the properties would be sold off. Adjusted for costs including potential legal fees, investors could get some money back.
What are the negatives associated with this project?
The projects can be high-risk.
What is more, the security trustee doesn’t protect clients money from an investment strategy that goes wrong.
The trustee merely makes sure that money isn’t being misappropriated, and is being used in the same manner that the investment informational memorandum indicated.
What is more, it appears that this firm, and the wider group, uses many SPVs. Whilst this can add security, it also makes the group structure difficult to understand and do due diligence on.
The fact that some of the directors of this firm which has issued the loan note are involved in an another entity which has became insolvent doesn’t automatically mean that the same thing will happen to this investment.
It just isn’t very reassuring from a track record point of view, even though we should never treat media reports as gospel.
What is more, some people associated with this project have put pressure on me to remove this article from public view.
That doesn’t reflect well on them.
What can you do if you have invested?
If the reports from the article above and here are correct, you can’t do anything apart from wait, as the loan notes probably won’t be directly affected, as they are in a different SPV.
If the loan note does default in the future, just like any alternative asset like this, hopefully the assets will be sold off and you will be returned some money. The process wouldn’t always be short in that instance.
Right now, Empire hasn’t defaulted, but looking at the track record of the directors involved in other projects makes sense.
If you have bought two or three investments like this, it makes sense to get a review of your entire portfolio, which I have done for other clients.
It can make sense to lower the risk of your entire investments given what has happened here.
What is more, it makes sense to reinvest elsewhere if this investment successfully pays out.
What is the track record of alternative assets?
Alternative assets can offer a value-added to investors portfolios, and there have been many good ones, but plenty of investors have also lost their money in other projects in the past.
That doesn’t mean that Empire will fine.
Ultimately, it is fine to invest in higher-risk investments, but only if you are willing to take a loss and keep such investments down to a small part of your overall portfolio and wealth.
What is happening with delayed coupons?
Empire are confident that they will repay investors after they sell off assets.
Only time will tell if that is proved correct.
What do Empire Special Situations say about Empire Property concepts?
They say that Empire Special Situations has nothing to do with MCIOD Ltd (Empire Property Concepts), and the companies aren’t in the same group.
However, looking at the track record of company directors makes sense.
So, the fact remains that whilst Empire Special Situations hasn’t defaulted, a company director is involved in an entity which recently has.
Conclusion
Empire, like all alternative assets, is a medium to high risk investment. That is at least transparent as per the declarations that investors need to sign.
The recent default involving one of the directors doesn’t mean Empire will also default. They haven’t defaulted yet and may never do.
However, investors should naturally look at the track record of the directors involved in other SPVs and investments like this always carry risk.
Therefore, people should only invest if they are willing to take a risk to lose money.
New investors, or those looking to renew, should carefully assess the risk.
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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.
