Mittelstandsanleihen are booming — who are they suitable for
The Stuttgart Stock Exchange launched the BondM trading segment in May 2010 with the aim of giving smaller companies access to the capital market and thus to alternative lenders by issuing their own bonds. This path was previously reserved for large medium-sized companies and corporations.
For the first time, not only institutional investors but also asset managers, family offices and experienced investors were able to subscribe to bonds at the issue price and thus at the issue yield via the subscription box created for this purpose. With this initiative, the Stuttgart Stock Exchange pioneered an idea that has since been taken up many times by other German stock exchanges. More than 100 bonds with a total nominal value of almost 4 billion euros have now been issued and listed on the SME segments of the German stock exchanges.
There is no uniform issuer profile. The German SME sector is far too heterogeneous for that. The list of issuers includes not only traditional industrial SMEs from a wide range of sectors, but also agricultural companies, trading companies, branded companies and real estate companies.
The SME bond represents an alternative financing option for long-term debt capital procurement. This will continue to be used by medium-sized companies in the future. It is neither a substitute nor a replacement for equity. The Mittelstandsanleihe will also only continue to develop successfully if it basically follows the rules that apply to other debt capital solutions. Turning the Mittelstandsanleihe into the new mezzanine would be the end of a good idea.
Mittelstandsanleihen are certainly not suitable for all investors. Investors should consider very carefully what level of risk they wish to take. In most cases, Mittelstandsanleihen are also only used as portfolio additions. In the meantime, there are also actively managed and risk-diversified funds on Mittelstand bonds in the market.
In order to deal sensitively with risks, information gathering and a good knowledge of the market and products are indispensable. Investors can, and diligently do, take advantage of the exchanges’ extensive information offerings with detailed pages on securities. Rating certificates and rating summaries can also be viewed, but often actually only for issuer ratings. The rulebooks of the stock exchanges do not currently make bond ratings mandatory, with the exception of collateralized bonds. It would be welcome if more bond ratings were shown in the future. However, issuers usually shy away from the additional costs.