By Fiona Henderson Venture capital trust managers are moving away from investing in gilts and cas...
By Fiona Henderson
Venture capital trust managers are moving away from investing in gilts and cash prior to fully investing the trust's capital and instead are placing the funds within their own unit trust ranges.
Martin Churchill, director of research at www.taxshelterreport.co.uk, said as the companies in which VCTs invest are at such an early stage of development, managers can wait three years before all the money subscribed is fully invested into venture capital.
Fully invested means that 70% of funds must be in venture capital.
While gilts and cash have always been widely used as a holding facility, Churchill said a trend is now emerging whereby many managers will put the funds into something like a unit trust. "In many cases the VCT managers will put the money into other products that their own company offers," he said.
The Aberdeen Growth VCT is a recent example of a manager proposing to invest in its own funds. Aberdeen launched two identical VCTs simultaneously, in order to be able to double the maximum amount that can be invested in a venture capital company, said Jonathan Willcocks, director Aberdeen Unit Trusts. All the funds raised will initially be invested in Aberdeen's UK funds.
The combined VCTs are seeking to raise £50m and as of 27 March have raised £11.25m. Willcocks said: "We will only launch the two together if we raise a minimum of £20m, which we are confident we can achieve by the end of the tax year."
The Capital for Companies VCT is to invest its non-qualifying proportion of funds in a mixture of fixed interest and BWD unit trusts. The manager of the VCT is a division of BWD Rensburg. The trust has raised £5m so far and is looking to attract £8m in total.
Another venture capital trust, which is using subscribed money to invest in the manager's unit trusts, is the Pennine Downing Aim 2 VCT.
This venture capital trust is managed by Rathbones, as were the previous VCTs in this series.
This time around, 40% of all money raised will be invested in five Rathbones unit trusts, with purchases phased over six months to reduce market timing risk.
The remaining 60% will be invested in fixed interest securities, which will also be managed by Rathbones. The VCT is looking to raise £20m. It has raised just £4.5m so far.
Churchill added that not only is the style of investing in the initial three-year period changing but there is a clear overhang of supply.
He said: "Last year there were not enough venture capital trusts for investors money. This year there are many VCTs nowhere near being fully subscribed as we draw nearer to the end of the tax year. Most investors will be attracted by the big names, which are also the companies offering unit trusts."
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