VCTs make their mark

Steve Marshall, Sales and Marketing Director

I’m writing as Maven’s £20m linked VCT offer is already approaching the £15m mark for funds raised, and it’s been fascinating to listen to investors and advisors over the past couple of months as they’ve talked about their reasons for investing with us:

• Consistency of income
• High quality asset base – later stage focus
• Specialist asset selection
• Tax-free income in retirement
• Alternative tax benefits after big reduction in reliefs on pension contributions
• Quality and size of Maven’s team
• Regular flow of new investments and exits
• Good risk management approach

But a real theme has been the recognition that there are attractive returns to be had from investment in smaller companies, and that there are VCT managers who’ve consistently shown they understand how to find and invest in really good quality and entrepreneurial businesses. These are assets that many retail investors couldn’t gain access to in other ways, and Maven’s national investment team has enabled our VCTs to offer exposure to a wide range of well researched private companies. Good managers are also able to meaningfully reduce risk with prudent use of loan-stock investment structures and targeting only proven businesses rather than early-stage of start-ups, which seems to have struck a chord with many investors.

The sometimes overlooked story in the VCT sector has been the quality of the resource and intensive selection process behind these assets. The typical investment model for the manager of e.g. a UK quoted equity income fund obviously has a limited range of potential assets it can target, all of which are on the radar of every manager running a fund with a UK equity focus and so lead to very similar portfolio.

Maven can offer real value and differentiation to our shareholders by sourcing high-growth and profitable businesses, usually with niche market or product offerings, through our access to corporate finance advisers and SMEs across the UK. But just as important is our access to off-market deals and a unique presence in the vibrant energy service sector, which is a function of our regional presence and sector expertise.

For many investors and advisers there seems to be a growing awareness of the place for strong VCTs in a portfolio, and they’ve been telling us they’re focused on building a reliable medium-to-long term tax efficient income base, whether that’s to combat the big hits on pension tax relief and the tax-free lifetime allowance, or just looking to beat the returns on offer from annuities, investment bonds, bank savings, collectives or taxable equities investors The Association of Investment Companies recently reported Generalist VCTs as having largely outperformed other investment areas over one, three, five and ten years, and we’ve certainly seen a lot of interest in the strong performance story on offer from the Maven VCTs.