Following the Russian invasion of Ukraine, increased energy costs and inflation in the headlines, you may ask, ‘what does it all mean for money invested in Bricks?’. It is a good question which we will attempt to answer.

Whilst stock markets offer the potential for high returns, they can also exhibit high volatility. Since we made our first loan in May 2015, the FTSE100 has had several daily moves of 3% or more, including one day of an 11% drop. Similarly, the S&P500 has had several daily losses of 3-4% and the largest single day drop of 12%.

In times of trouble, money tends to leave more volatile assets, such as shares, and goes to ‘safer’ assets such as high-quality bonds and gold. A Bricks loan note is like a fixed rate bond that benefits from the company taking security. With a historical loss ratio over the last seven years of just 0.15% we feel it is a relatively ‘safe’ investment.

Rising inflation tends to be bad for both shares (particularly high growth shares) and fixed rate bonds. However, although government bond prices fall as inflation rises, a Bricks loan is not affected in the same way. Because the interest we pay is so far above that of high grade corporate or government bonds, the value is not affected by relatively small movements in official rates or inflation expectations. As a comparison, the five year UK gilt yield has averaged around 0.75% pa over the last five years and is today at 1.1% pa, compared to a Bricks loan note of between 5% and 7% pa.

Consequently we see Bricks as being a relatively safe haven for cash. The FTSE100 is at the same level today as it was in May 2015, but has given investors plenty of sleepless nights. Bricks loans have returned between 5 and 7% pa, stayed at a constant value, and given peace of mind.

We hope that you find this reassuring. However if you would like to discuss this in more detail, please don’t hesitate to get in touch with us.