With the more restrictive pension rules hindering high earners’ ability to invest tax efficiently, more are using venture capital trusts as a way of mitigating tax and investing for the long term.
In 2017 to 2018, £730m was invested and with approximately £830m of capacity announced this tax year, an even greater amount may be subscribed.
These unprecedented levels of cash will dampen returns in the short term and also push up prices as too much cash is chasing too few quality deals.
In my view, this means you need to be more selective with the VCTs you choose for clients. Ensure your VCT team has sufficient depth and breadth to source interesting, unique deals, and, crucially, has the experience of investing in the newer type of deal now required.
The management of Maven 1 and 5 VCTs has these qualities and this top-up offer is seeking £30m, split between the two VCTs. Maven has 37 investment professionals across 11 offices nationwide – this breadth and depth is unparalleled, helping give them access to unique deals that many others do not get to see.
As VCTs are now about growth, there is much more emphasis on investing in companies either in structurally growing markets or those companies with disruptive technologies. These types of companies are Maven’s focus, combined with a typical minimum annual turnover of £1m and investing with second time entrepreneurs.
A normal deal will now be structured 70/30 equity to debt, whereas in the past it was the other way around.
Since the rules changed in 2016, Maven has invested £38m in 19 investments. Equally importantly, 11 sales have been made since the start of 2015 with an average return of 3.7 times the original amount invested.
Investing in these two established VCTs gives access to over 40 companies split across many different sectors. For example, Maven 1’s biggest sector today, with more than 30 per cent invested, is industrials.
The minimum investmentis £5,000, (£1,000 minimum per VCT) and the initial charge is 2.5 per cent. Maven 1 hasan annual fee of 1.9 per cent, whereas Maven 5’s fee is 1.6per cent.
Finally, it is nice to see some innovation in the VCT world with the first online application process – well done Maven.
I think investors have to choose carefully this year as too much money is a dangerous thing. I like this offer and will give it four out of five stars.
Ben Yearsley is director of Shore Financial Planning
