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Industry Update | March 2023
VENTURE
CAPITAL
TRUST
Analysis
Making a big impact on small businesses
Analysis
How will VCTs perform this year?
Thought Leadership
VCT investing on AIM: how to navigate the investment cycle for maximum returns
Analysis
Spring Budget 2023: a plan to make “Britain a technological superpower”
Thought Leadership
VCT’s evolving client profile: take another look at your client bank
Analysis
What to do for an encore
Thought Leadership
VCT: The underrated advantages
of being the new kid on
the block
Thought Leadership
5 myths about Venture Capital Trusts
Thought Leadership
The opportunity in
healthcare
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Industry Update | March 2023
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In partnership with:
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Interview by
02
Introduction
Market Update
Considerations for Investment
Industry Analysis
Managers in Focus
What's on the Horizon
Further Learning
Welcome
The VCT universe today
2
learning objectives
Introduction
Market update
Consideration for investment
Industry analysis
Mangers in focus
Whats on the horizon
Further learning
Focus on quality drives pandemic returns
SEIS expanded to support Government’s focus on innovation and entrepreneurs
Are hostile takeovers a danger to AIM investors and UK PLC?
Focus on quality drives pandemic returns
SEIS expanded to support Government’s focus on innovation and entrepreneurs
Are hostile takeovers a danger to AIM investors and UK PLC?
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This industry update of the Venture Capital Trust (VCT) — the first in our new format — comes out as the UK tax environment is about to undergo major changes, making it necessary for investors to maximise their tax efficiency.
We are thrilled to present our first 2023 VCT Industry Update in its enhanced format. Our revamped update has been carefully crafted to eliminate any extraneous information and to concentrate solely on the essential aspects that matter most to professionals in the field.
In this issue, we delve into a range of pressing topics, offering valuable insights and expert analysis.
Chancellor of the Exchequer Jeremy Hunt has presented a Spring Budget aiming to remove obstacles that stop businesses investing. Spring Budget 2023: a plan to make “Britain a technological superpower” looks at the potential impacts of the budgetary changes on VCTs.
In VCT investing on AIM: how to navigate the investment cycle for maximum returns, a highly respected investment manager explains how to navigate the investment cycle on AIM for maximum returns.
Aiming to debunk common misconceptions by providing accurate and reliable information about VCTs are 5 myths about Venture Capital Trusts.
In What to do for an encore?, we have reviewed the current VCT statistics and explore what is next after the highest fundraising ever in a single year.
In a review of 2022 and taking into account the progress made in the Windsor Framework, Nick Britton of AIC attempts to answer the key question: How will VCTs perform this year?
Highlighting some illuminating statistics, Making a big impact on small businesses, demonstrates the effectiveness of VCTs and the strength of the companies they have supported, particularly over the last five years.
The underrated advantages of being the new kid on the block explores the often-overlooked advantages of small VCTs.
And VCT’s evolving client profile; take another look at your client bank suggests that moving with the times is crucial to keep up with both legislation and commercial opportunities.
Escaping the zero-rate environment, argues the author of Who’s afraid of higher interest rates?, could see the emergence of an even more hardy crop of future start-ups and an overall better outlook for the VCT sector, and the broader UK economy.
In Why now is the best time in 10 years to buy private markets, the manager of the largest VCT provider on the market explains how investing in the private markets can help to diversify a portfolio by mitigating both public market risk and cyclical risk.
Thriving in uncertain times: How VCTs can help navigate
the turbulent economic climate
Analyse the main events and developments in the VCT market
Outline some sectors and strategies that successful VCT managers are leveraging
Evaluate statistical trends in VCT and the key fees and charges applied by VCT managers
Identify emerging trends and future development in the VCT market
Define some key topics of particular relevance to the VCT sector
Readers can claim up to 2 hours’ structured CPD. Click here to claim your CPD.
By the end of the update readers
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Learning objectives for CPD accreditation
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02
The EIS universe today
The EIS universe today
This industry update of the Venture Capital Trust (VCT) — the first in our new format — comes out as the UK tax environment is about to undergo major changes, making it necessary for investors to maximise their tax efficiency.
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
scroll down
MORE AIM POSITIVITY
eremy Hunt began his budget speech by saying that he intended to remove obstacles that stop businesses investing, helping to make “Britain a technological superpower”.
However, business groups have expressed mixed reactions to Chancellor's presentation before Parliament on Wednesday 15 March. The Confederation of British Industry (CBI) praised the Budget, calling it a "strong second act" and highlighting support for people and productivity.
The British Chambers of Commerce (BCC) commended the Chancellor for improvements to free childcare for working parents and the introduction of full capital expensing.
However, the Federation of Small Businesses (FSB) criticised the Budget for lacking support in core areas and overlooking small businesses.
The Institute of Directors (IoD) expressed strong support for the decision to allow all investment expenditure to be set against revenue for tax purposes in the year it is spent, urging the policy to continue beyond the initial three years.
What could the Budget mean for Venture Capital Trusts (VCTs)?
Opening Statement
Update Overview
1. INTRODUCTION
Market Composition
Fees and Charges
3. Considerations For Investment
Are Hostile Takeovers A Danger To AIM?
AIM In FCA’s Proposals
4. Industry Analysis
What Has The Market Been Doing?
More AIM Positivity
2021 AIM Listing
What's Driving the Market?
The Autumn Budget
'AIM' for success, not perfection
Focus Drives Pandemic Return
Small is Beautiful
Combatting Climate Change
Health is Wealth
What the Managers Say
2. market update
Amati Global
Blackfinch
Blankstone Sington
Close Brothers
Hawksmoor investment
Puma investments
Sarasin & Partners
Stellar investment
TIME investments
Unicorn
Comparison Table
5. managers in focus
More AIM-focused EIS
Future Market Changes Considered
What The Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclamer
7. further learning
Spring Budget 2023: a plan to make “Britain a technological superpower”
J
03
VCT investing on AIM: how to navigate the investment cycle for maximum returns
Here’s a recap of the relevant changes and its potential impact on the VCT sector:
Corporation Tax Increase
Even with the increase of the annual pensions allowance, these high earners will likely have significant income tax liabilities.
The corporation tax will increase from 19% to 25% starting next month, primarily affecting businesses with profits over £250,000. Companies with profits between £50,000 and £250,000 will receive some relief, while those with profits below £50,000 will
see no change.
Impact on VCTs: The corporation tax increase may affect VCT investment strategies, as they may prioritise companies that can benefit from the relief offered to lower-profit businesses. This could lead to VCTs focusing more on early-stage or smaller-scale investments in companies that fit within the tax relief thresholds.
By Mohamad Dabo, Senior Editor, Intelligent Partnership
The Confederation of British Industry (CBI) praised the Budget, calling it a "strong second act" and highlighting support for people and productivity.
Full Expensing and Business Investment
The £25 billion super-deduction tax break will be replaced with "full expensing," allowing businesses to write off 100% of qualifying capital expenditure in the UK against taxable profits in the same year. The Treasury estimates that this change will cost £9 billion initially, compared to £25 billion for the super-deduction, but will decrease over time.
Impact on VCTs: The introduction of full expensing may make it more attractive for VCTs to invest in businesses with significant capital expenditures, as it will provide an immediate tax benefit. This could lead to VCTs seeking out and investing in companies with substantial growth potential and capital requirements.
Investment Zones
Twelve "investment zones" will be established across the UK to offer businesses enhanced tax relief and lighter regulations. These zones must demonstrate partnerships between local government and a university or research institute to foster innovation.
Impact on VCTs: Investment zones will likely make it more appealing for VCTs to invest in companies located within these regions, as they can take advantage of enhanced tax relief and reduced regulations. This could result in VCTs focusing on businesses operating in these zones and collaborating with local research institutions.
AI Initiatives and Funding
The UK will launch an "AI sandbox" to accelerate the market entry of AI products, invest £900 million in a new supercomputer, and fund a £2.5 billion quantum computing research program. A £1 million annual Manchester Prize for outstanding AI research will also be introduced.
Impact on VCTs: The increased focus on AI initiatives and funding will likely make it more attractive for VCTs to invest in AI-related businesses. This support can stimulate the growth of AI start-ups, which could provide VCTs with a larger pool of potential investments within the artificial intelligence sector.
R&D Tax Credits
The Chancellor has partially softened the measures to cut R&D tax credits for small businesses, allowing high-tech sectors such as fintech and artificial intelligence to continue receiving enhanced tax credits for R&D investments.
Impact on VCTs: The continued availability of R&D tax credits for high-tech sectors will likely encourage VCTs to invest in innovative companies within these industries. This support could provide a financial incentive for VCTs to focus on investments in cutting-edge technology companies, boosting the overall innovation ecosystem.
Lifetime allowance abolished; annual allowance increased
From April 2023, the lifetime allowance (LTA) charge will be removed, before the allowance is abolished entirely from April 2024. In addition, the pensions annual allowance will increase from £40,000 to £60,000.
Impact on BR investment: These changes will encourage investment into pensions and probably lessen the pressure on individuals to seek alternative tax-efficient investments, which is generally not considered favourable for VCT investment.
However, appearance can be deceptive. “While on the face of it, abolishing the lifetime allowance might seem like bad news for the EIS and VCT markets, it should be noted that this measure is designed to encourage 15,000 high earners back to work,” notes Alan Sheehan, Co-Director of MICAP, a sister company of Intelligent Partnership.
“Even with the increase of the annual pensions allowance, these high earners will likely have significant income tax liabilities (especially after tapering is factored in) So, EIS and VCT inflows could really benefit from this Budget.”
intelligent-partnership.com
mohamed@intelligent-partnership.com
Mohamed Dabo
Senior Editor,
Intelligent Partnership
02
The VCT universe today
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
scroll down
MORE AIM POSITIVITY
or Venture Capital Trust (VCT) investors, the Alternative Investment Market (AIM) offers the potential for high returns through investments in high-growth companies. However, navigating the investment cycle on AIM can be as challenging as it is on any other stock market.
History shows that markets move up and down and that volatility is not unusual, with strong downward swings (like the one experienced during Covid) typically followed by strong upwards swings. As the economy recovers and the stock market improves, it is likely that the Alternative Investment Market will follow suit. Companies listed on AIM may benefit from the growing economy and increased investor confidence, which can drive up the value of their stocks.
Following a very difficult 2022 for AIM, we are currently seeing more realistic valuation expectations from management teams when considering the IPO of their business and therein lies the opportunity, according to AIM investment specialist Seneca Partners. Many of these investment opportunities have very strong potential.
Investing at the low point, to take advantage of a bounce-back, can be very profitable and Seneca’s investment team feels that there are indications that we may be at that point in the cycle. There are certainly some signs of life being seen on AIM, particularly when good news is released. Seneca sees this as an early indication that buyers’ appetite is returning and that pockets of value exist
on AIM, in stark contrast to the preceding 12 month period.
A solid understanding of how to identify and capitalise on the different stages of the economic and investment cycles can be essential to maximising returns.
The successful VCT investment manager’s strategies for navigating the AIM investment cycle
Opening Statement
Update Overview
1. INTRODUCTION
Market Composition
Fees and Charges
3. Considerations For Investment
Are Hostile Takeovers A Danger To AIM?
AIM In FCA’s Proposals
4. Industry Analysis
What Has The Market Been Doing?
More AIM Positivity
2021 AIM Listing
What's Driving the Market?
The Autumn Budget
'AIM' for success, not perfection
Focus Drives Pandemic Return
Small is Beautiful
Combatting Climate Change
Health is Wealth
What the Managers Say
2. market update
Amati Global
Blackfinch
Blankstone Sington
Close Brothers
Hawksmoor investment
Puma investments
Sarasin & Partners
Stellar investment
TIME investments
Unicorn
Comparison Table
5. managers in focus
More AIM-focused EIS
Future Market Changes Considered
What The Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclamer
7. further learning
VCT investing on AIM: how to navigate the investment cycle for maximum returns
F
04
VCT investing on AIM: how to navigate the investment cycle for maximum returns
Successful investment managers like Seneca use a number of methods that exploit the investment cycle within AIM, including:
Investing in sectors that tend
to perform well during certain stages of the economic cycle can help investors capitalise
on market trends and maximise returns.
Active management
Investing in cyclical sectors
Investing in sectors that tend to perform well during certain stages of the economic cycle can help investors capitalise on market trends and maximise returns. Examples might be investing in energy and materials during an expansion, and utilities and consumer staples during a recession.
Longer term investment horizon
Not all investments made by a VCT manager will see significant short-term swings in value and for those, the manager will have a longer-term investment horizon (generally 5+ years). For these, it is less critical to time the market perfectly as the manager will be looking to benefit from the potential long-term growth of investments.
This broad view of investment allows your clients to ride out market volatility and take advantage of market upturns.
AIM offers a diverse range of VCT-qualifying trades that meet these requirements, as well as offering the risk mitigation of diversification.
senecapartners.co.uk
siobhan.pycroft@senecapartners.co.uk
Siobhan Pycroft
Investment Manager,
Seneca Partners
Portfolios of AIM quoted investments make it easier and quicker for managers to move in and out of positions quickly and easily.
Actively monitoring and adjusting the portfolio as needed to help investors take advantage of different stages of both the investment and economic cycles. This allows for ongoing changes to the portfolio as necessary, aiming to achieve the best client outcomes.
Not only do portfolios of AIM quoted investments make it easier and quicker for managers to move in and out of positions quickly and easily, such as redeploying funds into a sector poised for the next growth surge. It also offers access to businesses that have been the subject to larger fundraises and institutional capital, and are therefore, better placed to execute business plans.
When an AIM quoted holding sees a significant increase in value over a short period of time, a VCT manager has the option of crystallising some or all of that gain as they are not forced to hold shares for a longer period of time. This can potentially result in "de-risking" or reducing the risk to capital of that specific investment.
By Siobhan Pycroft, Investment Manager, Seneca Partners
02
The VCT universe today
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
scroll down
Photography by
Interview by
ince their launch in 1995, Venture Capital Trusts (VCTs) have had a seismic impact in stimulating entrepreneurial growth, innovation, and jobs across the UK. Their focus today is investing exclusively in innovative smaller companies that are a crucial driver of the economy.
It’s easy to see why their popularity has surged among investors and savers. There are a range of benefits beyond backing exciting growth companies. VCTs can act as a valuable retirement planning option, they can help investors generate additional income, and can also complement other investment arrangements.
However, some advisers can be sceptical about VCTs and point to fears around the complexity, performance, and tax benefits. Here, we debunk five key myths around VCT investing.
This is simply untrue. You can get tax relief on many types of income, whether that’s your salary, property rental income or dividend income. And indeed VCTs were designed to be an attractive and tax-efficient investment, because of the importance of the start-up sector to the UK economy.
Tax rules can change, but VCT investors currently enjoy up to 30% of upfront income tax relief..
You can only get tax relief on earned income
- Van Hoang, Investment manager, Blackfinch Investments
The clearer market environment post-Brexit, as well as a tighter grip on the pandemic, creates an outlook conducive to increased listings on AIM.
Opening Statement
Update Overview
1. INTRODUCTION
Market Composition
Fees and Charges
3. Considerations For Investment
Are Hostile Takeovers A Danger To AIM?
AIM In FCA’s Proposals
4. Industry Analysis
What Has The Market Been Doing?
More AIM Positivity
2021 AIM Listing
What's Driving the Market?
The Autumn Budget
'AIM' for success, not perfection
Focus Drives Pandemic Return
Small is Beautiful
Combatting Climate Change
Health is Wealth
What the Managers Say
2. market update
Amati Global
Blackfinch
Blankstone Sington
Close Brothers
Hawksmoor investment
Puma investments
Sarasin & Partners
Stellar investment
TIME investments
Unicorn
Comparison Table
5. managers in focus
More AIM-focused EIS
Future Market Changes Considered
What The Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclamer
7. further learning
5 myths about Venture Capital Trusts
Don’t believe everything you hear about this useful - but often misunderstood - investment vehicle
It’s easy to see why their popularity has surged among investors and savers. There are a range of benefits beyond backing exciting growth companies.
S
05
5 myths about Venture Capital Trusts
The idea that VCT investments are exclusive to large city bonuses is quite widespread, and very far off the mark. In fact, HMRC recently published data showing that the average investment into a VCT in the 2021-22 tax year was £33,000.
Whilst the data shows that some investors are still fulfilling the maximum investment amount of £200,000, HMRC’s data is showing that less than 10% of all investment into VCTs were over £100,000.
The average VCT investment is over £100,000
The idea that VCTs are an especially complex investment vehicle is persistent, but doesn’t stand up to scrutiny. Claiming the tax relief on a VCT is relatively straightforward.
For advisers, the ability to purchase and manage client's investments via platforms has helped to digitise the investment process helping to broaden the market and appeal for VCTs further.
Not only that, clients who self-assess simply claim VCT tax relief when they file their tax return. Those on PAYE need to provide their VCT tax certificate along with a copy of their P60. They don’t even need to declare any dividends.
Advisers face a big administrative burden
There used to be some truth in this, but it no longer applies. Back in the mid-noughties, VCTs enjoyed tax relief of 40%, leading to aggressive allocations and some poor investment decisions.
But the VCT market has changed, and managers have become far more discerning. In fact, the majority of VCT managers today have been managing VCTs for decades through multiple economic cycles and can demonstrate strong track records of investment performance. Many VCTs (our own being a case in point) now conduct in-depth quantitative and qualitative analysis on target companies as part of a robust investment process.
The result? Research on 10 generalist VCTs in the decade to September 2022 found they outperformed the main stock market.
Start-ups are by nature more volatile than long-established businesses, but the overall performance of VCTs is now at least comparable to other popular investment products.
As an investment vehicle, VCTs perform poorly
The opposite is actually true, and is one of the main benefits of investing in a VCT.
While it is true that most dividends from investment products are considered taxable income, that’s not the case with dividends paid by VCTs. You don’t even have to declare them on your tax return.
Again, VCTs are designed as a way to channel money into the start-up sector, to help young businesses access the investment they need to thrive. For that reason, the tax benefits are deliberately generous. The absence of a dividend tax is just another advantage of this important but sometimes misunderstood investment vehicle.
www.triplepoint.co.uk
contact@triplepoint.co.uk
Billy Brown
Strategic Relationship Director,
Triple Point
Clients who self-assess simply claim VCT tax relief when they file their tax return.
By Billy Brown, Strategic Relationship Director, Triple Point
Any dividends are taxed
02
The VCT universe today
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
scroll down
Photography by
Interview by
Data from HMRC show that during the tax year 2021 to 2022, the amount of investment raised by VCTs increased year on year; this happened despite a decrease in the number of VCTs managing funds.
In that same year, the amounts claimed as tax relief went up, reflecting the increase in funds raised by VCTs in that tax year. (Amounts claimed as tax relief are reported with
a one-year time delay due to the nature of the self-assessment reporting system).
Fundraising remains robust in the face of ongoing consolidation
- Van Hoang, Investment manager, Blackfinch Investments
The clearer market environment post-Brexit, as well as a tighter grip on the pandemic, creates an outlook conducive to increased listings on AIM.
Opening Statement
Update Overview
1. INTRODUCTION
Market Composition
Fees and Charges
3. Considerations For Investment
Are Hostile Takeovers A Danger To AIM?
AIM In FCA’s Proposals
4. Industry Analysis
What Has The Market Been Doing?
More AIM Positivity
2021 AIM Listing
What's Driving the Market?
The Autumn Budget
'AIM' for success, not perfection
Focus Drives Pandemic Return
Small is Beautiful
Combatting Climate Change
Health is Wealth
What the Managers Say
2. market update
Amati Global
Blackfinch
Blankstone Sington
Close Brothers
Hawksmoor investment
Puma investments
Sarasin & Partners
Stellar investment
TIME investments
Unicorn
Comparison Table
5. managers in focus
More AIM-focused EIS
Future Market Changes Considered
What The Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclamer
7. further learning
06
What to do for an encore
What to do for an encore
For this section, we rely on MICAP data to help give you a snapshot of the size of the market, as well as the fees and charges you can expect to see from VCT offers. All data is accurate as of 07 February 2023.
enture Capital Trusts (VCTs) raised £1,122 million in the 2021/22 tax year. It is the highest amount of funds ever raised within a single tax year since the launch of this closed-ended collective investment scheme in 1995/96.
To be sure, last year’s number reflected a market recovering from a difficult year. This year, despite the economic challenges, investors are flocking to the latest VCT offerings. As the end of the current tax year draws near, fundraising is still going strong with £597 million raised as of January 16th, only slightly down from the same period last year when VCTs raised a record amount.
Nonetheless, the outlook for VCTs remains positive. With frozen tax thresholds, investors are searching for alternative places to park their cash and the five-year requirement to hold a VCT for tax relief instils a long-term mentality.
Of course, VCT shares come with a 30% upfront income tax relief on investment and tax-free dividends and capital gains. Not only does this present a compelling opportunity for investors, but also for VCT managers in a tougher market, as lower valuations can be taken advantage of.
What to do for an encore
V
The data suggests a bright outlook for EIS, offering hope for investors aiming to take advantage of the UK’s most ambitious companies.
VCT headlines
Venture Capital Trusts (VCTs) issued shares to the value of £1,122 million in 2021 to 2022, which is 68% higher in comparison to the 2020 to 2021 figure of £668 million.
The number of VCTs raising funds has increased by
6 to 46 in the tax year 2021 to 2022.
The number of VCTs managing funds has decreased by 5 to 52 in the tax year 2021 to 2022.
In 2020 to 2021, Venture Capital Trust (VCT) investors claimed Income Tax (IT) relief on £640 million of investment. This is an increase of 10% from 2019
to 2020.
The number of VCT investors who claimed Income
Tax relief increased by 9% to 19,475 in 2020 to 2021.
Source: HMRC
In the wake of the record-breaking 2021/22 VCT season that saw investment break through the £1 billion mark for the first time, the VCT market has evolved, with the most sought-after VCTs filling up rapidly in a matter of days.
The data from MICAP, a sister company of Intelligent Partnership, paints an optimistic picture for the rest of 2023. For VCTs, the net result of all the political and economic turmoil is expected to be a progressive and continuous funnelling of investors into VCTs over the year.
Looking ahead into 2023
Most of the returns from VCTs are distributed as tax-exempt dividends throughout the VCT's lifespan. The current open offers target an average return of 5%.
VCT managers strive for a constant stream of dividends by structuring their investments in underlying companies with an emphasis on income production. They may accomplish this by allocating part of the investment as a loan and the rest as shares.
The repayments on the loan result in a steady income for the VCT, and in the case of business failure, loans take precedence over equity due to the higher priority they are given. This makes the investment less risky if the business holds assets that can be sold.
Target returns
The outlook for VCTs remains positive. With frozen tax thresholds, investors are searching for alternative places to park their cash and the five-year requirement to hold a VCT for tax relief instils a long-term mentality.
There are currently 40 open VCT offers, more than 4-fold the nine offers available at the time of our previous analysis in August. Focusing on both growth and income, these offers resolve a classic dilemma for investors: should I be investing for growth or investing for income?
Open offers
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
Average
0.05
0.07
Mode
Min
Median
Max
Target returns of open offers
0.05
0.04
0.05
The majority of the open offers invest in early-stage companies (64.3%), followed by later-stage businesses (21.4%), and AIM-listed companies (14.3%).
This is not what advisers might typically expect, with later-stage companies generally considered as the accepted hunting ground for VCT managers. Such a company is characterised by MICAP as: “a company that, at the point of investment, is generating significant revenues (e.g. £1 million plus per annum) from an established customer base and may also be profitable. Later-stage companies will typically be raising larger amounts than seed/early-stage companies (e.g. deal sizes of £10m+), with the potential for an exit in 3 - 5 years”.
This is likely to have been influenced by the risk to capital conditions and has led to a notable recent rise in the number of VCTs focusing on less developed investee companies, where quicker and higher growth may be available.
Investee company type
Market composition of open offers by investment sector
0.64
0.142
AIM listed
Asset-backed
0.214
Seed stage
A large majority of open offers focus on the general enterprise sector (92.3%), a diversified area of investment where VCT managers can handpick the businesses they see as most promising from a variety of industries.
Technology (5.1%), pharmaceuticals & biotechnology (2.6%) are the other targeted sectors. These sectors are among the most lucrative in the UK and can often require the kind of investment horizon that fits the VCT minimum holding period.
Investment sectors
All fees and charges, but one, have come down since our last analysis in August. Initial charge to investee companies has plummeted by over 30%, while the total initial charge has dropped by more than 14%. Given the difficult context for SMEs and individuals, this is perhaps unsurprising.
The almost across-the-board shrinkage of fees is interesting because many fees have gone up in the larger investment market, along with other prices in the high inflation rate environment. The lone charge that has increased, the AMC charged to investors, seems to reflect this trend.
With lower fees, more of the investment return is kept by the investor, which can result in higher overall returns.
Fees and charges
Initial Charge to Investors Excluding Adviser Fee
Initial Charge to Investee Company
Total Initial Charge
AMC Charged to Investor
AMC Charged to Investee Company
AMC
Annual Per Fee
Annual Per Hurdle
Annual Admin Charge
2.67
0.92
3.26
1.99
0.24
1.98
14.52
9.68
0.07
2.89
1.33
3.78
1.78
0.43
2.11
17.22
13.89
0.44
February 2023
August 2022
% Change
-7.61%
-30.83%
-13.76%
+11.80%
-44.19%
-6.16%
-15.67%
-30.31%
-84.09%
The government's latest alterations to its tax budget will sustain the positive progress that the VCT sector has achieved in recent years.
In the future, the significance of VCTs in the UK's financing environment is projected to grow as investors seeking to invest in the future of UK SME businesses, admist geopolitical and economic instability, are drawn to these vehicles due to the important tax incentives they continue to offer.
intelligent-partnership.com
mohamed@intelligent-partnership.com
Mohamed Dabo
Senior Editor,
Intelligent Partnership
By Mohamad Dabo, Senior Editor, Intelligent Partnership
02
The VCT universe today
intelligent-partnership.com
mohamed@intelligent-partnership.com
Mohamed Dabo
Senior Editor,
Intelligent Partnership
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
scroll down
he average VCT lost 8.5% on a total return basis in 2022, ending a 13-year run of positive annual returns.
There should be nothing surprising about that fact. Not many assets did well in 2022, with its awful combination of war, political turmoil, high inflation and rising interest rates.
In fact, considering that VCTs are a high-risk asset, investors may feel that they got off pretty lightly.
By breaking down performance by category, we can add some nuance to the picture. Generalist VCTs – those that invest mainly in unquoted companies in a range of sectors – delivered a negative return of 4.2%, while AIM VCTs (the next biggest category) lost an average 28.4%.
As we saw in 2008, AIM VCTs respond much faster to a downturn in sentiment because their portfolios are made up of publicly quoted companies. It is not necessarily the case that those companies are performing much worse than thoseunquoted companies, but rather their valuations adjust quicker.
The valuation of unquoted companies tends to be conservative, at least in the context of VCT portfolios. When companies make positive progress, it is not a given that valuations will be adjusted upwards, unless another round of investment takes place at a higher
valuation. Equally, valuations are not normally adjusted downwards just because of a change in sentiment.
Stock markets, by contrast, look ahead – and sometimes get it wrong by thinking things will be worse (or better) than they turn out.
So arguably, the million-dollar question around VCT performance in 2023 is whether the AIM market is giving us a glimpse of what the future holds for the valuations of unquoted companies in VCT portfolios.
In the immortal words of Ira Gershwin, it ain’t necessarily so. Back in 2008 – a much worse crisis for the financial markets – AIM VCTs lost 48% and generalist VCTs were down 19%. The following year, AIM VCTs bounced back 20% and generalist VCTs were flat at 0%.
In other words, the public markets were staring into the abyss. The bankruptcy of
Lehman brothers in September 2008 seemed to signal that no-one was safe
and nothing would ever be the same again. But barely six months later, the worst of the panic was over and markets had started to recover.
Had markets stayed at 2008 levels for longer, no doubt 2009 would have been more painful for generalist VCTs. But as it turned out, they did not stay depressed for long enough for the full impact to be felt in the valuations of VCTs’ unquoted portfolios.
This gives us a clue as to what might happen this time round: if markets snap back before too long, generalist VCTs may never plumb the depths that AIM VCTs did last year. And of course, the closed-ended, evergreen structure of all VCTs means there is no need to crystallise paper losses by selling investments into an unfavourable market.
Aside from the negative total return in 2022, it was a good year for dividends. Some profitable exits, such as the sale of interactive investor to abrdn, led to bumper profits for VCTs and some chunky special dividends for their investors. Out of 54 VCTs, 28 raised their dividends and 10 held them steady, meaning that a lower proportion of VCTs cut their dividends than in any of the previous three years.
It would be rash to predict a similarly strong year in 2023. Several VCTs have signalled that the current environment looks more conducive to making new investments than to selling existing portfolio companies for a profit.
In addition, many VCTs have now moved to a target dividend expressed as a percentage of net asset value (NAV), rather than fixed in pence: 5% rather than 5p. If NAV falls, the target dividend in currency terms will adjust downwards.
For all that, VCT managers are far from despairing. They point to the inbuilt resilience of many established portfolio companies, which provide important services to other businesses and enjoy recurring revenues. They are bullish about new investment opportunities, where valuations are starting to look more attractive. And the whole VCT industry has taken heart from continuing government support of the scheme.
In the Autumn Statement, the Treasury reaffirmed its commitment to both VCTs and EIS, and said the government “sees the value of extending them in the future”. It is remarkable and encouraging that VCTs have been backed by Chancellors of every political stripe, from Kenneth Clark to Gordon Brown, George Osborne to Jeremy Hunt (and yes, even by Kwasi Kwarteng). Another step forward came with the Windsor Framework announced in February.
This deal with the EU on Northern Ireland frees up the UK government to get rid of the so-called “sunset clause” in VCT legislation, which brings an automatic end to the 30% upfront tax relief enjoyed by VCT investors in April 2025. The AIC continues to engage with the Treasury on this crucial issue.
In the meantime, it seems VCTs are in good shape to withstand broader economic turbulence. The next year will no doubt be testing for some of their portfolio companies. But it’s also likely to lead to opportunities for others. At times like this, investors will be thankful for the diversification built into every VCT’s portfolio, which helps to smooth away some of the rough edges of early-stage investing.
Delivering dividends
Opening Statement
Update Overview
1. INTRODUCTION
Market Composition
Fees and Charges
3. Considerations For Investment
Are Hostile Takeovers A Danger To AIM?
AIM In FCA’s Proposals
4. Industry Analysis
What Has The Market Been Doing?
More AIM Positivity
2021 AIM Listing
What's Driving the Market?
The Autumn Budget
'AIM' for success, not perfection
Focus Drives Pandemic Return
Small is Beautiful
Combatting Climate Change
Health is Wealth
What the Managers Say
2. market update
Amati Global
Blackfinch
Blankstone Sington
Close Brothers
Hawksmoor investment
Puma investments
Sarasin & Partners
Stellar investment
TIME investments
Unicorn
Comparison Table
5. managers in focus
More AIM-focused EIS
Future Market Changes Considered
What The Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclamer
7. further learning
How will VCTs perform this year?
07
How will VCTs perform this year? and a look ahead into 2023
"In the Autumn Statement, the Treasury reaffirmed its commitment to both VCTs and EIS, and said the government “sees the value of extending them in the future."
theaic.co.uk
enquiries@theaic.co.uk
Nick Britton
Head of Intermediary Communications
The Association of Investment Companies (AIC)
T
It is remarkable and encouraging that VCTs have been backed by Chancellors of every political stripe, from Kenneth Clark to Gordon Brown, George Osborne to Jeremy Hunt (and yes, even by Kwasi Kwarteng).
By Nick Britton, Head of Intermediary Communications, The Association of Investment Companies (AIC)
02
The VCT universe today
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
VCTs are the go-to retirement investment for UK investors
Venture Capital Trusts (VCTs) are becoming an increasingly popular way for UK investors to save for retirement, according to a recent survey by the Association of Investment Companies (AIC).
The survey found that 60% of VCT investors use these vehicles to prepare for their golden years. The typical VCT investor has 13% of their assets invested in these tax-efficient vehicles, which invest in small, young UK companies with high growth potential.
VCT investors have varying attitudes to risk. Nearly half of respondents (48%) consider themselves medium-high risk investors, while 14% consider themselves high-risk investors. On the other hand, 28% of VCT investors classify themselves as medium-risk and 10% as cautious.
The main reason why investors choose VCTs is the attractive tax incentives that come with them. VCTs offer 30% upfront income tax relief, tax-free dividends, and tax-exempt capital gains. These tax breaks are essential to VCT investors, with 79% saying they are the primary reason they invest in the vehicles.
The growth potential that comes from backing young companies early is another reason why investors are drawn to VCTs, with 79% of respondents citing it as a reason to invest.
More than half of VCT investors (55%) see supporting innovation as a factor, and the same number (55%) invest in VCTs to support UK entrepreneurs.
The current economic outlook in the UK and the possibility of a recession make supporting smaller UK businesses more important, with over three-quarters of respondents (76%) agreeing.
VCTs invested £650 million in small UK businesses in 2022, a 21% increase on the previous year when they invested £539 million. When asked to rank how important the different tax benefits of VCTs are to them, 55% of respondents chose the 30% upfront tax relief as the most important, followed by tax-free dividends at 28%. Regarding tax-free dividends, most VCT investors surveryed opt to re-invest them.
However, 29% say they spend their tax-free dividends, with some using them for luxuries and hobbies, while others rely on them for living expenses. Several respondents said that the tax-free dividends supplement their retirement income.
The various tax incentives are essential to investors' support of the VCT scheme. Only 8% of respondents would still invest in VCTs if the upfront tax relief was removed, and only 16% would still invest if the advantage of tax-free dividends was removed.
Compared to other tax-efficient schemes, VCTs are viewed by investors as easier to invest in or more accessible, offering tax-free dividends, and being less risky than other tax-efficient schemes.
Venture capital trusts (VCTs) are becoming an
increasingly popular way for UK investors to save
for retirement, according to a recent survey by the
Association of Investment Companies (AIC).
Source: AIC/Research in Finance
Apart from the tax breaks, why do you invest in VCTs?
20%
14%
6%
5%
29%
31%
55%
55%
79%
Growth potencial of backing young companies early
Supporting innovation (e.g science and technology)
Supporting UK entrepreneurs
Interest in VCTs' investee companies
Stimulatiing economic benefits (e.g. job creation)
Supporting UK regions outside London/South East
ESG benefits in general
Other
None of the abouve
0% of respondents
scroll down
2021 AIM LISTINGS
In the last five years, VCTs have invested over £1.7 billion in more than 530 small, potentially high-growth UK SMEs.
Opening Statement
Update Overview
1. INTRODUCTION
Market Composition
Fees and Charges
3. Considerations For Investment
Are Hostile Takeovers A Danger To AIM?
AIM In FCA’s Proposals
4. Industry Analysis
What Has The Market Been Doing?
More AIM Positivity
2021 AIM Listing
What's Driving the Market?
The Autumn Budget
'AIM' for success, not perfection
Focus Drives Pandemic Return
Small is Beautiful
Combatting Climate Change
Health is Wealth
What the Managers Say
2. market update
Amati Global
Blackfinch
Blankstone Sington
Close Brothers
Hawksmoor investment
Puma investments
Sarasin & Partners
Stellar investment
TIME investments
Unicorn
Comparison Table
5. managers in focus
More AIM-focused EIS
Future Market Changes Considered
What The Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclamer
7. further learning
Making a big impact on small businesses
08
Making a big impact on small businesses
The following is taken from the AIC report, ‘Funding Opportunity: Making a big impact on small businesses’, published late last year. These extracts shine a light on some of the impressive history of VCTs, particularly over the last five years and the illuminating statistics paint a picture of both the mechanisms that make VCTs work and the strength of the companies they support:
Since 2018, 55% of investments have been follow-on investments from a VCT.
90% by value of VCT investment since 2018 was made via equity, but debt financing has also been an important part of the mix.
To read the full report, click here.
£1.7 BILLION
55%
40%
Of the 418 SMEs receiving investment since 2018, where data is available, 338 (81%) received only equity investments. This reflects the primary intention of the scheme to provide long-term equity investment.
81%
40% of VCT-backed businesses employ between 20 and 49 employees, compared with 3% in the rest of the economy. 38% of VCT-backed businesses employ over 50 members of staff. Only 2% can say the same in the wider UK economy.
VCTs have been able to adjust exposure in some situations to include a proportion of debt. 50 SMEs received a mix of debt and equity, with debt making up less than 50% of these investments. 17 SMEs received higher levels of debt, which reduced the equity dilution of earlier investors and founders.
17 SMEs
VCTs have sold their investments in 70 SMEs that have received an investment since 2018. (38%) of these have been at a profit. (61%) have been at a loss – nine of those losses have been a total loss.
70 SMEs
It is a common practice for a VCT representative to be appointed to the SME’s board. Since 2018, 178 unquoted SMEs have appointed a representative of the VCT to their board.
178
Since 2018, 131 (51%) SMEs backed by VCTs have collectively reported exports of £400 million. This compares very favourably with the record of SMEs in the economy as a whole, where only 10% make sales abroad.
131 SMEs
202 (79%) SMEs invested in by VCTs, since 2018, invested £482 million in R&D.
79%
Since 2018, SMEs invested in by VCTs have employed 14,042 staff members. The average number of staff per SME is 55.
14,042
90%
By Lisa Best, Head of Financial Services Content, Intelligent Partnership
intelligent-partnership.com
lisa@intelligent-partnership.com
Lisa Best
Head of Financial
Services Content
Intelligent Partnership
02
The VCT universe today
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Since 2018, 131 (51%) SMEs backed by VCTs have collectively reported exports of £400 million.
intelligent-partnership.com
lisa@intelligent-partnership.com
Lisa Best
Head of Financial
Services Content
Intelligent Partnership
Since 2018, 131 (51%) SMEs backed by VCTs have collectively reported exports of £400 million.
ith the VCT sector turning 28 this year, it’s surprising how much of a rare breed new VCTs are, with only a few having been successfully launched in the past decade.
The rarity of new entrants into the sector could be down to many investors reflexively targeting the larger and longer-established VCTs, rather than diversifying into younger and often more promising VCTs.
However, this ongoing consolidation is reducing the manager diversification possibilities, even though investing in a new VCT can be a great way to spread risk and unlock new avenues for growth.
Guinness Ventures, sister company to Guinness Global Investors (both from the Guinness Asset Management stable), is a great example having made the leap to launch a brand new VCT in October 2022.
Although it is one of the precious few newcomers to the VCT world, Guinness Ventures brings its track record and experience of over ten years of EIS management with a batch of impressive exits under its belt.
VCT investors can now benefit from the experience and expertise of the team at Guinness Ventures through investment in the new Guinness VCT.
So, what are the main advantages of investing in a new VCT?
W
At the intersection of healthcare and technology, advances in 'healthtech' are driving down costs, while improving patient access and outcomes.
VCT: the underrated advantages of
being the new kid on the block
09
VCT: the underrated advantages of being the new kid on the block
Guinness Ventures brings its track record and experience of over ten years of EIS management with a batch of impressive exits under its belt.
Concerns that valuations of legacy investments in a VCT are too high can be an issue for VCTs, as the private investments they hold may not have been sufficiently marked down after a market correction. This is not a concern for investors in a new VCT, where the opening NAV is based on the cash raised.
Valuations and legacy issues
This lack of legacy issues means that there may well be more transparency on the current position, making it easier to achieve growth from a realistic starting point.
Transparency and growth prospects
The valuations of private companies are cyclical and follow a similar trajectory to public companies. 2022 saw a fall in the multiples applied to growth companies, particularly in the technology sector. This makes the current period an excellent time to be investing, and growth company investors with capital to invest are well positioned to get in at lower valuation multiples that have been available for several years.
Market Timing
Figures released by HMRC in January 2023 showed there were 52 active VCT managed funds in the 2021/22 tax year, down from 57 the year before. These funds were managed by [16] different fund management firms, which makes the VCTs a fairly concentrated market.
But this is not a new trend, back in 2018, HMRC stated: “The number of VCTs managing funds increased from 12 in 1995-96 to a peak of 131 in 2007-08. Since 2007-08 the number of VCTs managing funds has generally been decreasing, dropping to 70 in 2017-18.”
This ongoing consolidation of VCTs by VCT managers has been slowly reducing the manager diversification possibilities and has made investing in a new VCT a very attractive way to unlock new choices for profits.
Unlocking new choices for profits
Source: ftadviser
1995-96 2000-01 2005-06 2010-11 2015-16 2020-21
140
120
100
80
60
40
20
0
Number of VCTs raising and managing funds, 1995-96 to 2021-22
VCT raising funds
VCT managing funds
We draw on the extensive investment management, venture capital and private equity expertise of our highly experienced investment team
Shane Gallwey
Head of Ventures,
Guinness Ventures
guinnessgi.com/ventures
eis@guinnessfunds.com
By Shane Gallwey, Head of Ventures, Guinness Ventures
08
The VCT universe today
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
he profile of investors in Venture Capital Trusts (VCTs) has evolved, largely driven by the mass affluent. Importantly, though, the majority are not considered to be high net worth individuals (HNWs.) That seems entirely reasonable, as, according to HMRC’s 2022 Venture Capital Trusts statistics, published in January 2023, those investing £10,000 or less have represented the largest group of VCT investors.
Those financial advisers not taking note of the changes could be missing out; the diversification on offer from potentially high growth equities, uncorrelated with turbulent public markets, could be excellent for some client portfolios, for a start.
VCT’s evolving client profile: take another look at your client bank
T
Other factors contributing to the change in VCT investors include the drop in entry levels for VCTs, with some products, like Puma’s VCT 13, having minimum investments as low as £3,000. The rise of alternatives and their role as diversifiers in an increasingly correlated world, and the availability of investments to match investor priorities like sustainability and levelling up, are also making a difference. So are the recent extensions to frozen tax thresholds and upcoming drops in Capital Gains Tax and dividend allowances. They are driving up tax liabilities, both for those pushed into higher tax brackets by rising wages and those seeking tax-efficient growth and income.
So, while client circumstances vary and individual suitability must be carefully scrutinised, simply excluding all consideration of VCTs on a single basis, such as HNW status, may not be the right approach. With valuable rewards on offer for clients, there is a danger of failing the standards of the Consumer Duty by excluding a potential route to the best client outcomes. We'd suggest taking a look at Puma's VCT 13 as a starting point for your VCT research.
According to HMRC’s 2022 Venture Capital Trusts statistics, published in January 2023, those investing £10,000 or less have represented the largest group of VCT investors.
These shifts have a lot to do with the rise of those in the middle classes with money to spend, but whose assets still require careful management heading towards retirement, otherwise known as the mass affluent. Definitions of their wealth vary, but Accenture has suggested they have between £100,000 and £1 million of investable assets, with around 6 million households in the UK falling into this category. But only about 600,000 of them are HNWs (Accenture, 2019).
Many are well-paid professionals who have a high enough salary and investable assets to meet the criteria for investment applied by VCT managers to ensure their clients can understand and afford what they are investing into. Large numbers of them are headteachers, doctors, accountants and lawyers, as well as business owners.
They are not limited to London and the South East geographically, and another change in investor profile noted by Puma is a change in VCT investor location: 39% of VCT fundraising came from London in 2018/19 compared to 28% in 2021/22, with the biggest shift in more investors coming from South Central, as well as northern regions.
Unsurprisingly, the mass affluent can afford to invest and research has found that 70% of them are doing just that (RFI Global, August 2022). In the past, this group has been labelled as being ‘rich without realising it’, but Covid-19 has been credited with refocusing many on prioritising more considered spending and saving more.
Middle class money
Risks are high, but so is interest
Once favoured by older, wealthier investors, recent data from the Venture Capital Trust Association showed the average age of the current VCT investor is down from 67 (2017) to 56 (2022) (FT Adviser, February 2022).
Puma Investments has reported a similar decrease, particularly between 2018/19 to 2022/23 which saw a drop from 60.22 years to 54.69. But this average also masks a jump in investment from the under-40s who swelled to account for 10% of the VCT manager’s investor base in 2022/23, from just 2% in 2018/19. What’s more, the total amount this age-group has invested with Puma ticked up 74% in the same period.
Not only does this give today’s investors more time for their VCT investments to grow and mature, but it also demonstrates the growing appeal of VCTs to a younger generation of clients.
10
VCT’s evolving client profile: take another look at your client bank
39% of VCT fundraising came from London in 2018/19 compared to 28% in 2021/22
Market trends shaping the future
pumainvestments.co.uk
advisersupport@pumainvestments.co.uk
Karen Sullivan
Head of Strategic
Partnerships
Puma Investments
Investor’s capital may be at risk. Past performance is no guarantee of future returns. Tax benefits are subject to change and depend on the individual’s circumstances.
Puma Investments is a trading name of Puma Investment Management Limited (FCA no. 590919) which is authorised and regulated by the Financial Conduct Authority. Registered office address: Cassini House, 57 St James's Street, London, SW1A 1LD. Registered as a private limited company in England and Wales No. 08210180.
For investment professionals only.
By Karen Sullivan, Head of Strategic Partnerships, Puma Investments
he profile of investors in Venture Capital Trusts (VCTs) has evolved, largely driven by the mass affluent. Importantly, though, the majority are not considered to be high net worth individuals (HNWs.) That seems entirely reasonable, as, according to HMRC’s 2022 Venture Capital Trusts statistics, published in January 2023, those investing £10,000 or less have represented the largest group of VCT investors.
Those financial advisers not taking note of the changes could be missing out; the diversification on offer from potentially high growth equities, uncorrelated with turbulent public markets, could be excellent for some client portfolios, for a start.
VCT’s evolving client profile: take another look at your client bank
T
Other factors contributing to the change in VCT investors include the drop in entry levels for VCTs, with some products, like Puma’s VCT 13, having minimum investments as low as £3,000. The rise of alternatives and their role as diversifiers in an increasingly correlated world, and the availability of investments to match investor priorities like sustainability and levelling up, are also making a difference. So are the recent extensions to frozen tax thresholds and upcoming drops in Capital Gains Tax and dividend allowances. They are driving up tax liabilities, both for those pushed into higher tax brackets by rising wages and those seeking tax-efficient growth and income.
So, while client circumstances vary and individual suitability must be carefully scrutinised, simply excluding all consideration of VCTs on a single basis, such as HNW status, may not be the right approach. With valuable rewards on offer for clients, there is a danger of failing the standards of the Consumer Duty by excluding a potential route to the best client outcomes. We'd suggest taking a look at Puma's VCT 13 as a starting point for your VCT research.
According to HMRC’s 2022 Venture Capital Trusts statistics, published in January 2023, those investing £10,000 or less have represented the largest group of VCT investors.
These shifts have a lot to do with the rise of those in the middle classes with money to spend, but whose assets still require careful management heading towards retirement, otherwise known as the mass affluent. Definitions of their wealth vary, but Accenture has suggested they have between £100,000 and £1 million of investable assets, with around 6 million households in the UK falling into this category. But only about 600,000 of them are HNWs. (Accenture, 2019)
Many are well-paid professionals who have a high enough salary and investable assets to meet the criteria for investment applied by VCT managers to ensure their clients can understand and afford what they are investing into. Large numbers of them are headteachers, doctors, accountants and lawyers, as well as business owners.
They are not limited to London and the South East geographically, and another change in investor profile noted by Puma is a change in VCT investor location: 39% of VCT fundraising came from London in 2018/19 compared to 28% in 2021/22, with the biggest shift in more investors coming from South Central, as well as northern regions.
Unsurprisingly, the mass affluent can afford to invest and research has found that 70% of them are doing just that (RFI Global, August 2022). In the past, this group has been labelled as being ‘rich without realising it’, but Covid 19 has been credited with refocusing many on prioritising more considered spending and saving more.
Middle class money
Market trends shaping the future
Investor’s capital may be at risk. Past performance is no guarantee of future returns. Tax benefits are subject to change and depend on the individual’s circumstances.
Puma Investments is a trading name of Puma Investment Management Limited (FCA no. 590919) which is authorised and regulated by the Financial Conduct Authority. Registered office address: Cassini House, 57 St James's Street, London, SW1A 1LD. Registered as a private limited company in England and Wales No. 08210180.
For investment professionals only.
Risks are high, but so is interest
Once favoured by older, wealthier investors, recent data from the Venture Capital Trust Association showed the average age of the current VCT investor is down from 67 (2017) to 56 (2022) (FT Adviser, February 2022).
Puma Investments has reported a similar drop, particularly between 2018/19 to 2022/23 which saw a drop from 60.22 years to 54.69. But this average also masks a jump in investment from the under-40s who swelled to account for 10% of the VCT manager’s investor base in 2022/23, from just 2% in 2018/19. What’s more, the total amount this age-group has invested with Puma ticked up 74% in the same period.
Not only does this give today’s investors more time for their VCT investments to grow and mature, but it also demonstrates the growing appeal of VCTs to a younger generation of clients.
10
VCT’s evolving client profile: take another look at your client bank
39% of VCT fundraising came from London in 2018/19 compared to 28% in 2021/22
pumainvestments.co.uk
advisersupport@pumainvestments.co.uk
Karen Sullivan
Head of Strategic
Partnerships
Puma Investments
By Karen Sullivan, Head of Strategic
Partnerships, Puma Investments
08
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Who’s afraid of higher interest rates?
In this divergent market we found new opportunities that met the Close Inheritance Tax Service’s quality criteria at reasonable valuations.
2022 was an interesting year and 2023 is shaping up to be another. Last year saw one of the most synchronised sell-offs across asset classes in decades, leaving few places for investors to hide.
I
11
Who’s afraid of higher interest rates?
ndeed, high inflation eventually forced the US Fed into a speedy rate-hiking cycle, leading to a bear market. It is no wonder, then, that investors have become fixated about a potential end to the hiking cycle.
The good news has been that inflation has started to come down; and the long-awaited recession is now increasingly being shrugged off by investors as either unlikely or set to be quite mild, particularly in the US.
One piece of bad news, however, is that the UK may still need to catch up with this narrative. In our view, the Bank of England remains behind the pace in normalising interest rates to a level consistent with the UK’s price dynamics and economic activity.
This obviously matters for an asset class like Venture Capital Trusts, which is particularly sensitive to domestic divergences from global macroeconomic trends.
buy the dip
buy it even harder if central banks telegraph that they are in ‘easing’ mode.
In recent years, investors had done well by following two simple rules:
Longer term, investors in VCTs should welcome escaping an environment with interest rates indefinitely stuck at zero.
1
2
2022 rewrote that investment playbook, in a stark reminder that what central banks give, central banks
can take away — and that markets can be negatively impacted when conditions require liquidity to be withdrawn.
Moreover, the inherently illiquid nature of VCTs makes the outlook for UK interest rates particularly relevant to its future returns. Finally, investors should also be increasingly mindful of political risks.
Many geopolitical events of the past year illustrate the fact that markets are affected by more than just interest rates. The slow reshaping of alliances and of the ‘world order’ will continue to alter the flows in capitals and good, affecting countries' budgets. This will have important repercussions for assets like VCTs, whose fortunes are partly tied to the whims of the people holding the public purse strings.
All these factors have contributed to a muted performance from VCTs so far this year (AIM-listed VCTs are down about 3.4% and Generalist VCTs down 0.3% YTD), relative to asset classes more exposed to the strengthening global tailwinds. VCTs are not alone in this: the same forces are also holding back, for example, the more domestically focused FTSE250 index relative to global equity indices.
We have long argued that perpetually low interest rates stifle productivity and unduly prolong the agony of firms that would otherwise have failed much sooner.
fathom-consulting.com
risktailors.com
andrea.zazzarelli@fathom-consulting.com
Andrea Zazzarelli
Technical Director
Fathom Financial
Consulting and Risk Tailors
Whether 2023 will shape up
to be a good year for VCTs and UK-sensitive assets mostly depends on two things:
1) the ability of the UK economy to reach peak interest rates, and
2) the ability of the global economy to withstand the highest level of interest rates in decades.
In both cases, the outlook for interest rates will remain the dominant short-term investment risk. Longer term, however, investors in VCTs should welcome escaping an environment with interest rates indefinitely stuck at zero. We have long argued that perpetually low interest rates stifle productivity and unduly prolong the agony of firms that would otherwise have failed much sooner.
This is an important and often overlooked dynamic behind a healthy venture capital market. More importantly, escaping the zero-rate environment could see the emergence of an even more hardy crop of future start-ups and an overall better outlook for the VCT sector, and the broader UK economy.
By Andrea Zazzarelli, Technical Director, Fathom Financial Consulting and Risk Tailors
02
The VCT universe today
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
nvesting in private markets has become an increasingly popular option for investors seeking to diversify their portfolios and generate attractive returns. And with the current economic landscape marked by high inflation and uncertainty, private markets may offer unique advantages for investors seeking to navigate these challenges.
In fact, the tougher economic conditions tend to create discounted opportunities in private markets, which can be especially appealing to investors seeking higher returns and less volatility.
Why now is the best time in 10 years to buy private markets
I
Investors should seek generalist exposure to the venture capital asset class to benefit from the innovation that happens across the economy.
That said, specialist investors tend to outperform generalist ones, as they can better find and assess relevant opportunities and are often preferred by the founders they seek to invest into. Investors should, therefore, invest into multiple sector-specific funds or seek a fund that leverages specialist expertise across multiple sectors.
Tougher economic conditions tend to create discounted opportunities in private markets, which can be especially appealing to investors seeking higher returns and less volatility.
Generalist exposure with specialist investors
The decade's optimal investment opportunity
Now is really the best time in a decade to invest in this space. Here are some reasons why:
12
Why now is the best time in 10 years to buy private markets
The compounding benefit of ecosystem maturity will continue to play out, leading to more ambitious founders, more talent, and the creation of more innovative companies.
By Malcolm Ferguson, Partner, Octopus Ventures
Firstly, the private markets have evolved significantly over the past decade. The venture capital ecosystem has flourished, and there are now more experienced founders, talented individuals, capital at various stages, exit paths, and the right culture and ambition.
The success of each wave of companies further strengthens the ecosystem, and serial entrepreneurs tend to have higher ambitions, leading to the creation of more innovative and disruptive companies.
Secondly, funding scarcity presents itself in several ways, creating opportunities for investors in private markets. The current investment climate also presents talent availability, lower competition, and lower valuations, all of which factor into higher returns when a holding is eventually sold. Moreover, the level of funding has decreased, resulting in fewer companies being funded and less competition, increasing the probability of success.
Thirdly, investing in private markets presents several advantages compared to public markets. Companies start their lifecycles as private companies, and they are staying private much longer. Private markets offer exposure to revenue growth, new areas of innovation, and companies that are not well suited to the reporting cadence of being a public company.
Private markets, therefore, complement public markets, and investing in both presents a balanced portfolio.
Access to an instantly diversified portfolio of smaller companies
Looking ahead, the private markets are set to perform well in the next decade. Innovation is a timeless trend, and there are always opportunities created by new technologies.
The compounding benefit of ecosystem maturity will continue to play out, leading to more ambitious founders, more talent, and the creation of more innovative companies. However, the ecosystem will need to adapt to a higher interest rate environment, resulting in more expensive capital and lower exit valuations.
Optimism in an age of change
Octopus Titan VCT is an attractive option for potential investors who are interested in private market investment.
The VCT is the largest in the market and focuses on investing in UK-based technology and technology-enabled companies. The investment team operates in five specialist areas, which are deep tech, fintech, health, consumer, and B2B software.
We are constantly scouring the UK for the best entrepreneurs in these spaces every year and aim to deliver that to investors. Investors can expect to receive two things from their investment in Octopus Titan VCT: capital appreciation and dividends, which are paid annually.
The VCT invests in seed and series A stage companies that are in the early stages of their life cycle, and are looking for businesses in the five sectors mentioned earlier.
The most important thing that the team looks for in potential investments is the quality of the founder. We are looking for amazing founders with incredible vision to back them for the next 10 years or more.
Octopus Titan VCT: a diversified portfolio of companies, spread across five core sectors
There are, however, some potential risks associated with investing in private markets. These include higher failure risk associated with earlier stage companies and reduced liquidity. Investors can mitigate these risks through portfolio diversification, especially with early-stage investments.
Established VCTs offer a different proposition for investors, as they have portfolios of over 100 companies, providing immediate diversification benefits, and investors can sell their shares back to the VCT after five years, retaining their original income tax relief.
octopusventures.com
support@octopusinvestments.com
Malcolm Ferguson
Partner,
Octopus Ventures
02
The VCT universe today
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
scroll down
2021 AIM LISTINGS
Funding gap accentuated by cuts to R&D tax credits
Fusing ‘defensive’ and ‘growth’
Opening Statement
Update Overview
1. INTRODUCTION
Market Composition
Fees and Charges
3. Considerations For Investment
Are Hostile Takeovers A Danger To AIM?
AIM In FCA’s Proposals
4. Industry Analysis
What Has The Market Been Doing?
More AIM Positivity
2021 AIM Listing
What's Driving the Market?
The Autumn Budget
'AIM' for success, not perfection
Focus Drives Pandemic Return
Small is Beautiful
Combatting Climate Change
Health is Wealth
What the Managers Say
2. market update
Amati Global
Blackfinch
Blankstone Sington
Close Brothers
Hawksmoor investment
Puma investments
Sarasin & Partners
Stellar investment
TIME investments
Unicorn
Comparison Table
5. managers in focus
More AIM-focused EIS
Future Market Changes Considered
What The Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclamer
7. further learning
The opportunity in healthcare
13
The opportunity in healthcare
These opportunities have been magnified by the funding gap at the intersection of healthcare and technology. Life Science funds primarily focus on drug development and tech investors prefer to avoid sectors with heavy regulation and long sales and innovation cycles.
Private equity and the public markets only tend to invest in the space once companies’ edge towards profitability. This has resulted in a large gap where funding is needed to bridge the time from innovation to adoption, which in healthcare tends to be longer. At Downing, we focus here, as we believe there is value to be had in doing so - both for us, and healthcare systems worldwide.
What’s more, while the healthcare sector is a hub of innovation, the rate changes announced in the Autumn Statement to R&D tax relief for SMEs will significantly reduce the enhanced tax relief and tax credits available. This could restrict or prevent healthcare companies from carrying out development activity until they source new investment or funding, which could generate more demand for VCT capital from VCTs like the Healthcare share class of the Thames Ventures VCT 2 plc.
We see healthcare as a sector that offers a unique combination of defensive stability and growth potential.
Its low correlation with macroeconomic conditions makes it a defensive choice, with demand for healthcare remaining steady even during economic fluctuations. Looking at the MSCI World Health Care Index, Janus Henderson’s research shows that healthcare has only seen drops of 51% of the falls of the wider index over the last five economic downturns.
In addition to its defensive characteristics, healthcare is boosted by growth from demographic trends and advancements in technology. As populations in both developed and emerging markets continue to age and become wealthier, the demand for healthcare services increases.
All of these factors present an opportunity for trailblazing entrepreneurs to help create a thriving health ecosystem. Ultimately, entrepreneurship and healthcare are linked, and the bonds between the two are growing deeper as business practices drive the healthcare industry into a wellness industry.
It could also open up great investment opportunities for those who target the UK’s high-growth, innovative young companies.
Private equity and the public markets only tend to invest in the space once companies’ edge towards profitability. This has resulted in a large gap where funding is needed to bridge the time from innovation to adoption, which in healthcare tends to be longer.
Introduction
Market update
Consideration for investment
Industry analysis
Mangers in focus
Whats on the horizon
Further learning
Focus on quality drives pandemic returns
SEIS expanded to support Government’s focus on innovation and entrepreneurs
Are hostile takeovers a danger to AIM investors and UK PLC?
Focus on quality drives pandemic returns
SEIS expanded to support Government’s focus on innovation and entrepreneurs
Are hostile takeovers a danger to AIM investors and UK PLC?
Section text
Section text
Section text
Section text
Section text
Source: London Stock Exchange, FTSE Index Records and Daily Closing Values, 1 October 2021
Healthcare systems worldwide are facing significant headwinds such as ageing populations, workforce challenges, accelerating costs and a post-covid legacy. These pressures are negatively impacting patients in a variety of ways, such as: growing waitlists, worsening patient outcomes, lack of access to quality care and affordability.
This creates an abundance of opportunities for the UK’s world-leading healthcare ecosystem, with academic institutions and small companies pioneering the healthcare and life sciences technologies of tomorrow.
These organisations are leading the way in researching and developing solutions to key health issues that will transform people’s lives. Such a positive social impact is attractive to a growing group of ESG-focused investors.
These organisations are leading the way in researching and developing solutions to key health issues that will transform people’s lives.
Share of individuals who said select problems were the biggest facing the health care system in Great Britain in 2022
0% 10% 20% 30% 40% 50% 60% 70%
Not enough staff
Access to treatment/long waiting times
Againg population
Bureaucracy
Lack of investment in preventitive health
Lack of investment
Poor quality treatment
Cost of accessing treatment
Poor safety
Low standards of cleanliness
Lack of choice
Other
Share of respondents
Source: Statista
56%
46%
27%
21%
19%
19%
9%
9%
5%
5%
4%
4%
downing.co.UK
sales@downing.co.uk
Nick Priest
Partner
Downing
By Nick Priest, Partner, Downing
02
The VCT universe today
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
scroll down
Opening Statement
Update Overview
1. INTRODUCTION
Market Composition
Fees and Charges
3. Considerations For Investment
Are Hostile Takeovers A Danger To AIM?
AIM In FCA’s Proposals
4. Industry Analysis
What Has The Market Been Doing?
More AIM Positivity
2021 AIM Listing
What's Driving the Market?
The Autumn Budget
'AIM' for success, not perfection
Focus Drives Pandemic Return
Small is Beautiful
Combatting Climate Change
Health is Wealth
What the Managers Say
2. market update
Amati Global
Blackfinch
Blankstone Sington
Close Brothers
Hawksmoor investment
Puma investments
Sarasin & Partners
Stellar investment
TIME investments
Unicorn
Comparison Table
5. managers in focus
More AIM-focused EIS
Future Market Changes Considered
What The Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclamer
7. further learning
14
Continuing Professional Development
Intelligent Partnership has achieved accredited status from the CII and PFS. Members of these professional organisations represent the majority of the insurance, investment and financial services industry.
Claim your CPD
Continuing Professional Development
This guide is accredited for structured CPD by the CII and PFS and readers of the guide can claim one hour of CPD for each hour spent reading the guide, up to a total of four hours.
In order to claim CPD, readers will need to complete a short online test.
For more details on claiming CPD go to:
intelligent-partnership.com/cpd
This publication contains general information only and the contributors are not, by means of this publication, rendering accounting, business, financial, investment, legal, tax or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Neither the contributors, their firms, affiliates nor related entities shall be responsible for any loss sustained by any person who relies on this publication. The views and opinions expressed are solely those of the authors and need not reflect those of their employing institutions. Although every reasonable effort has been made to ensure the accuracy of this publication, the publisher accepts no responsibility for any errors or omissions within or for any expense or other loss alleged to have arisen in any way in connection with this publication.It is not an offer to sell, or a solicitation of an offer to buy, the instruments described in this document. We recommend that prospective investors consult their own suitably qualified professional advisers concerning the possible tax consequences of purchasing, holding, selling or otherwise disposing of any of the investment options in this publication. .This publication is based on the authors’ understanding of the structure of the arrangements detailed, the current tax legislation and HM Revenue & Customs practice as at August 2022 which could change in the future. Intelligent Partnership is not authorised and regulated by the Financial Conduct Authority and does not give advice, information or promote itself to individual retail investors. It is the responsibility of readers to satisfy themselves as to whether any arrangement contemplated is suitable for recommendation to their clients. Tax treatment depends on an investor’s individual circumstances and may be subject to change. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors. This publication is not included in the CLA Licence so you must not copy any portion of it without the permission of the publisher. All rights reserved.
Covered on pages 7, 8, 11
Outline some sectors and strategies that successful VCT managers are leveraging
Analyse the main events and developments in the VCT market
Covered on pages 4, 9, 12, 13
Identify emerging trends and future development in the VCT market
Covered on pages 8, 10, 11, 12
Define some key topics of particular relevance to the VCT sector
Covered on pages 5, 9, 10, 11, 12
Evaluate statistical trends in VCT and the key fees and charges applied by VCT managers
Covered on pages 6, 7
Disclaimer
cpd
How did you do?
learning objectives
Introduction
Market update
Consideration for investment
Industry analysis
Mangers in focus
Whats on the horizon
Further learning
Focus on quality drives pandemic returns
SEIS expanded to support Government’s focus on innovation and entrepreneurs
Are hostile takeovers a danger to AIM investors and UK PLC?
Focus on quality drives pandemic returns
SEIS expanded to support Government’s focus on innovation and entrepreneurs
Are hostile takeovers a danger to AIM investors and UK PLC?
Section text
Section text
Section text
Section text
Section text
02
The VCT universe today
Intelligent Partnership has achieved accredited status from the CII and PFS. Members of these professional organisations represent the majority of the insurance, investment and financial services industry.
Claim your CPD
Disclaimer
This guide is accredited for structured CPD by the CII and PFS and readers of the guide can claim up to TWO HOURS of CPD for each hour spent reading the guide, up to a total of four hours.
In order to claim CPD, readers will need to complete a short online test.
For more details on claiming CPD go to:
intelligent-partnership.com/cpd
This publication contains general information only and the contributors are not, by means of this publication, rendering accounting, business, financial, investment, legal, tax or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Neither the contributors, their firms, affiliates nor related entities shall be responsible for any loss sustained by any person who relies on this publication. The views and opinions expressed are solely those of the authors and need not reflect those of their employing institutions. Although every reasonable effort has been made to ensure the accuracy of this publication, the publisher accepts no responsibility for any errors or omissions within or for any expense or other loss alleged to have arisen in any way in connection with this publication.It is not an offer to sell, or a solicitation of an offer to buy, the instruments described in this document. We recommend that prospective investors consult their own suitably qualified professional advisers concerning the possible tax consequences of purchasing, holding, selling or otherwise disposing of any of the investment options in this publication. .This publication is based on the authors’ understanding of the structure of the arrangements detailed, the current tax legislation and HM Revenue & Customs practice as at March 2023 which could change in the future. Intelligent Partnership is not authorised and regulated by the Financial Conduct Authority and does not give advice, information or promote itself to individual retail investors. It is the responsibility of readers to satisfy themselves as to whether any arrangement contemplated is suitable for recommendation to their clients. Tax treatment depends on an investor’s individual circumstances and may be subject to change. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors. This publication is not included in the CLA Licence so you must not copy any portion of it without the permission of the publisher. All rights reserved.
Continuing Professional Development
Spring Budget 2023: a plan to make “Britain a technological superpower”
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How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
About Intelligent Partnership
About Intelligent Partnership
We organise focused events and provide a suite of materials to keep advisers and industry professionals up to date with the latest developments and on course to meet their training and CPD targets.
Our range of engaging, accessible and CPD accredited resources includes:
ntelligent Partnership is the UK’s leading provider of insights and education in the tax advantaged and alternative investments space.
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A deeper dive into individual providers giving their input on particular market issues and more detail on the strategies and offerings they have developed to address them.
Provider spotlight emails
Our dedicated programme includes a variety of in-person and virtually hosted events, across the country. Supporting financial advisers and the tax planning community, we facilitate knowledge building of tax wrappers in a workshop environment. We host webinars and conferences that focus on specific areas of tax and estate planning, celebrating the role of the UK SME investment and finance communities through our annual Growth Investor Awards.
Awards, conferences, webinars and workshops
Our CPD tax planning online accreditation programme is aimed at regulated advisers, wealth managers, paraplanners, accountants and solicitors that require a recognised level of knowledge and understanding in EIS, SEIS, VCT and Business Relief.
www.accreditation.intelligent-partnership.com
Accreditation
A weekly snapshot of the latest articles, commentary and market data for financial services professionals on tax efficient investment and estate planning. These are sent alongside our regular CPD emails, providing the opportunity to earn CPD time based on relevant articles and content provided by ourselves and external providers.
Weekly investment briefings
Free, award winning series including EIS, VCT, BR and AIM updates offering ongoing observations and intelligence,
the latest thoughts and opinions of managers and providers, and a comparison of open investment opportunities.
www.intelligent-partnership.com/
esearch-format/publications
Quarterly industry updates
15
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The VCT universe today
About Intelligent Partnership
We organise focused events and provide a suite of materials to keep advisers and industry professionals up to date with the latest developments and on course to meet their training and CPD targets.
Our range of engaging, accessible and CPD accredited resources includes:
ntelligent Partnership is the UK’s leading provider of insights and education in the tax advantaged and alternative investments space.
I
A deeper dive into individual providers giving their input on particular market issues and more detail on the strategies and offerings they have developed to address them.
Provider spotlight emails
Our dedicated programme includes a variety of in-person and virtually hosted events, across the country. Supporting financial advisers and the tax planning community, we facilitate knowledge building of tax wrappers in a workshop environment. We host webinars and conferences that focus on specific areas of tax and estate planning and celebrate the role of the UK SME investment and finance communities through our annual Growth Investor Awards.
Awards, conferences, webinars and workshops
Our CPD tax planning online accreditation programme is aimed at regulated advisers, wealth managers, paraplanners, accountants and solicitors that require a recognised level of knowledge and understanding in EIS, SEIS, VCT and Business Relief.
accreditation.intelligent-partnership.com
Accreditation
A weekly snapshot of the latest articles, commentary and market data for financial services professionals on tax efficient investment and estate planning. Alongside our regular CPD emails providing the opportunity to earn CPD time based on relevant articles and content provided by ourselves and external providers.
Weekly investment briefings
Free, award winning series including EIS, VCT and BR offering ongoing observations and intelligence, the latest thoughts and opinions of managers and providers.
www.intelligent-partnership.com/
research-format/publications
Quarterly industry updates
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
Spring Budget 2023: a plan to make “Britain a technological superpower”
VCT investing on AIM: how to navigate the investment cycle for maximum returns
5 myths about Venture Capital Trusts
What to do for an encore
How will VCTs perform this year?
Making a big impact on small businesses
VCT: The underrated advantages of being the new kid on the block
VCT’s evolving client profile: take another look at your client bank
Who’s afraid of higher interest rates?
Why now is the best time in 10 years to buy private markets
The opportunity in healthcare
