Investment firm Octopus seems to have its tentacles in all the pies, as it has today become the latest business to offer an Innovative Finance Isa.
The new type of Isa was introduced by the government last year, to give retail investors access to peer-to-peer lending. Octopus's version will invest in loans secured against property, and aims to return a variable interest rate of around four per cent per year.
Octopus is also aiming to dismiss the risks associated with peer-to-peer lending by contributing five per cent of every loan from its own pocket. Any losses suffered will come out of this sum first, meaning investors can get their initial investment back plus any interest due to them before Octopus earns anything.
“I believe at a time of low interest rates, rising inflation and ever-present stock market instability, an alternative tax-efficient investment solution has never been more important or valuable to investors,” said Sam Handfield-Jones, head of the firm's peer-to-peer lending branch Octopus Choice.
Investors will be able to put as little as £10 in the tax-free product, and up to their annual Isa allowance which currently stands at £20,000. Their cash will be placed in loans secured against UK property, and underwritten by Octopus's property investment team. Octopus Property has lent more than £2.6 billion since its launch in 2009, with a default rate of less than 0.1 per cent.
As well as its property arm, Octopus operates several other strategies including a fund management business, a healthcare investment branch, a venture capital firm, a low-cost energy supplier and a financial technology (fintech) innovation unit.
Few platforms are currently authorised to offer an Innovative Finance Isa. Octopus will join the likes of Lending Works, Crowd2Fund, CrowdStacker, CapitalRise, LendingCrowd, Goji, PropertyCrowd and Crowd for Angels who currently offer the product.
Many of these providers demand a higher minimum investment – some as much as £5,000 – although several also aim to return more to investors in interest, with the highest being CapitalRise at a target of 10 to 14 per cent.
City grandee Lord Adair Turner put the cat amongst the pigeons last year shortly after the government revealed its plans for the new Isa, saying that some of the investments which peer-to-peer lenders were making would make the worst bankers "look like lending geniuses".
However he later backtracked on this statement, saying the peer-to-peer firms "could perform credit underwriting as well as established banks".