Retail investors are being excluded from the UK corporate bond market, warns the Investment Management Association (IMA).
It blames the large number of bond issues and the complex way they interact, saying this makes it difficult for investors to understand the implications if a company fails.
"Although the number of companies issuing bonds is akin to that in the equity markets, each issuer typically has a plethora of different bond-issues but only one type of share," it adds.
The trade body also says the minimum investment in the UK is usually around £50,000, much higher than on the continent. Germany, for instance, has 23 of 29 corporate bonds with a lot size of around €1,000.
Finally, the IMA says the market's over-the-counter nature makes it hard to create what would be viewed as 'normal' levels of pre- and post-trade transparency, while difficulty in the design and implementation of best execution rules also hinders investment.
Jane Lowe, director of markets at the IMA, says although bonds may seem, on the surface, easier to understand than equities, this is not always the case.
"The nature of primary issuance and secondary market trading arrangements in the UK act to prevent retail participation in the sterling corporate bond market."IFAonline
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