The annual rush into VCTs is on. The highly popular British Smaller Companies VCTs opened on Wednesday looking to raise up to £90 million. Within the first day £8.4 million was invested (£6.02 million through Wealth Club).
The longstanding Northern VCTs, which also opened on Wednesday, raised £3.81 million, (£1.96 million through Wealth Club). Other popular offers looking to open shortly include Octopus Titan, the Maven VCTs and Molten.
Alex Davies, CEO and founder of Wealth Club, the UK’s biggest VCT broker comments:
“Despite the economic gloom the VCT season has got off to a flying start, with £8.4 million being invested into the British Smaller Companies VCT within the first day. The VCT has been around since the mid 1990s and has a legion of loyal fans, so the demand is hardly surprising.
We expect demand for VCTs this tax year to remain robust and fundraising could quite possibly hit the billion pound mark achieved in last two years. The overall tax burden is at a multi-decade high, and for wealthier investors VCTs are one of the best tax shelters left.
As well as the tax relief VCTs also give investors the ability to back fast growing British companies that can achieve growth levels potentially far in excess of companies on the listed market. That’s good for investors and good for Britain. The types of companies in which VCTs invest create a disproportionate amount of growth and jobs, a win-win for both investors and UK plc.
The rapid fundraise for both the British Smaller Companies and Northern VCTs is worth investors taking note of. Good offers raise quickly, and early investor discounts can quickly be exhausted. Investors need to be on the ball if they want the best selection of VCTs at the best prices.”
The British Smaller Companies VCTs:
“Despite the name, the British Smaller Companies VCTs are all about making sizeable bets on sizeable businesses – in VCT terms at least. The team usually invests £2 million to £6 million at a time, and companies should have at least £1 million of revenue. These businesses are typically not start-ups that are just a twinkle in the founder’s eye, they’re established operations looking for the next phase of growth.
Historically the manager, YFM, has done a good job of backing businesses that are capable of making the jump from startup to potential world beater. In the current portfolio Outpost VFX and Matillion stand out. Visual effects business Outpost VFX has worked on everything from Star Trek to the Rings of Power, while data analytics platform Matillion is one of Europe’s fastest growing private technology businesses and boasts customers including Cisco, Amazon and Accenture – discerning customers who know the value of data.
Those successes have left the portfolio a little top heavy, with Matillion alone accounting for between 12% and 16% of net assets, but another year of successful fundraising should help the VCT further diversify its portfolio.”
The Northern VCTs
“The Northern VCTs have achieved a raft of exits in recent times, with proceeds of over £154.6 million in a little over two years. Several of its larger exits have been at sizeable premiums – resulting in some very healthy uplifts for investors.
However, exiting more mature businesses leaves behind a portfolio that is younger on average. That could mean fewer exits in the near term, and means support for existing companies is likely to account for a greater share of new investments.
Fortunately, new investors can afford to be patient, as VCT shares must be held for at least five years to qualify for tax relief. In Mercia, the funds benefit from an experienced manager, with a national presence that should provide access to a wide selection of new investment opportunities. That is a strength that should pay off in the long term.”