Fixed-Income Investments: Higher Returns for the Patient Investor

18 January 2024

The Latvian investment market is currently experiencing a transformation, leading to a heightened interest in fixed-income investments. This shift is a logical response to investors seeking higher and more predictable returns than those offered by other investment vehicles.

Fixed-income investments have been growing rapidly in the Baltic investment market in recent years. Characterized by regular income, these investments not only contribute to the growth of local businesses but also ensure the anticipated returns for investors. The varied market interest in traditional Baltic investments signals a keen investor appetite for higher returns through alternative instruments within a regulated and monitored framework.

Many Baltic citizens are hesitant to actively invest their spare funds, often stemming from a lack of financial literacy and knowledge about investment opportunities beyond bank deposits. It's also important to note that affluent investors frequently dominate attractive bond subscriptions, limiting availability for smaller and mid-sized investors. Jānis Blaževičs, CEO of CrowdedHero, the first local licensed crowdfunding platform, comments, "That is why it is important to offer investors simple and straightforward investments in mature and time-tested companies whose management has proven its ability to set and achieve ambitious goals. Equally important is to provide a lower minimum investment threshold to make investments more attractive to a wider range of stakeholders."

In response to this growing demand, market players have already begun offering an array of fixed-income products. For instance, these include bonds with annual yields of 7-11%, as opposed to government savings bonds which offer lower yields, up to 3.5% annually. Fixed-income investments align more closely with Baltic investors' expectations when offering net returns above 10% per annum, though the diversity of such options is expanding gradually.

A crucial question remains: What are the premier fixed-income opportunities available in the Baltics? While banks and exchanges provide bond investments with medium-term yields typically ranging from 3-5% per year, investment platforms can offer significantly higher returns, sometimes double or more. Within this landscape, local crowdfunding platforms, such as CrowdedHero with its net interest rate exceeding 14.25% per annum, particularly stand out.

Essentially, fixed-income investing involves allocating raised funds into the capital of established, successful companies, thus furnishing them with the necessary resources to effectively execute pre-agreed development plans. While various methods exist to oversee the execution of development plans and fund utilization, entrusting this task to the professionals, namely the lead investors, often yields the best outcomes. Through a specially created Joint Stock Company, this entity represents the interests of the investment platform, the lead investor, and the financed company.

When evaluating a wide range of investments, including fixed income, attention must be paid to the assessment of risks. Stay vigilant and steer clear of unlicensed platforms to avoid potential fraud.

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