The Jockey Club, which owns famous racecourses including Cheltenham and Epsom Downs, has launched the first retail bond in British sport.
The Jockey Club Racecourse Bond offers investors a headline rate of 7.75% gross interest per annum.
This is made up of 4.75% gross interest paid as cash and 3% as ‘Rewards4Racing Points’ which can be redeemed against tickets, food or drinks at any of their 15 racecourses across the UK.
There is a minimum five year term, with a minimum investment of £2,000 and maximum investment of £100,000.
Money raised by The Jockey Club Racecourse Bond will be used to fund towards a new £45m Grandstand development at the Jockey Club’s flagship Cheltenham Racecourse.
Leaving aside the ‘Rewards4Racing Points’ component of the total return, the 4.75% gross interest paid as cash is likely to appeal to savers who would struggle to obtain an interest rate close to this level in the current economic environment.
Retail Bonds like this differ from savings accounts and savers should take care to understand the differences.
In return for your cash you are getting a promise from the company to pay you interest and return your capital at the end of the term.
The safety of your money depends on the financial strength of the company, as there is no protection from the Financial Services Compensation Scheme (FSCS). If the company issuing the Retail Bond goes bust, you can lose some or all of your money.
Investors are being rewarded for this additional risk with the higher than cash returns being offered.
Some Retail Bonds can be traded on the London Stock Exchange, effectively offering investors early access to their money, but others including this new launch from the Jockey Club cannot, so investors must wait until the end of the term to get their cash back.
Photo credit: Flickr/benkaf2
