ADDX Academy: What Are Wholesale Bonds?

Key Takeaways

Wholesale corporate bonds are offered in denominations of S$250,000 or more
ADDX allows users to buy fractional shares of these bonds for much smaller amounts
They are only available to institutional investors and accredited investors
They offer higher yields than government bonds
They can offer investors a steady, predictable income stream, with payouts scheduled on particular dates

What are wholesale corporate bonds?

In Singapore, wholesale corporate bonds are bonds offered by private companies in denominations of at least S$250,000. Unlike retail bonds, which are issued in smaller amounts and are accessible to the general public on public securities exchanges, wholesale bonds have historically only been available over the counter (OTC).

While wholesale bonds’ price tag of S$250,000 or more puts them out of reach to most investors – including many accredited investors – ADDX makes them more accessible by fractionalizing them into smaller shares and allowing a wider pool of investors access.

What are the advantages of investing in wholesale corporate bonds?

Higher Yields – Wholesale corporate bonds offer higher yields than government or municipal bonds because companies have lower credit ratings than governments, and thus the yields provide compensation for the higher risks. Government bonds are also backed by governments themselves, which means the state guarantees it will pay the coupons and principal. Companies cannot guarantee repayment the same way because they don’t have the government’s ability to print money when times are tough.

Lower Risk – While the risk profile of individual wholesale bonds can vary greatly, they are generally considered a lower risk asset class compared to public stocks or private equity.

Steady Income: Bonds offer investors a steady, predictable income stream, with payouts scheduled on particular dates.

What are the disadvantages?

Default Risk – The lower credit ratings of wholesale corporate bonds compared to government bonds mean the investor may be exposed to a higher possibility of default.

Liquidity - Wholesale corporate bonds are not listed on public stock exchanges are thus less liquid than retail bonds.

Who can invest in wholesale corporate bonds?

In Singapore, investing in wholesale corporate bonds has traditionally been limited to institutional investors and the extremely wealthy. ADDX democratizes wholesale bond investing by fractionalizing them and making them available to accredited investors for as little as S$10,000 for primary offerings and as little as S$100 to trade.

To qualify as an iSTOX investor, investors need to meet one or more of the following conditions:

•Yearly income of at least S$300,000 or

•Net financial assets of at least S$1,000,000 or

•Net total assets of at least S$2,000,000

The bottom line

Wholesale bonds can be a valuable addition to a diversified portfolio. They offer a steady and predictable income stream and, given that they have lower credit ratings than government bonds, generally offer higher yields too. However, before investing, investors need to assess the potential risks they may be exposed to.

ADDX is your entry to private market investing. It is a proprietary platform that lets you invest from USD 10,000 in unicorns, pre-IPO companies, hedge funds, and other opportunities that traditionally require millions or more to enter. ADDX is regulated by the Monetary Authority of Singapore (MAS) and is open to all non-US accredited and institutional investors.