hargreaves lansdown believes cautious investors will make it fairly hard to raise monies
A number of VCTs are preparing to come back to the market in the search of new funds and shareholders, however few look likely to raise significant assets.
Hargreaves Lansdown has identified five that are definitely returning, along with one very probable and three likely candidates.
The opportunity to investors is inviting Hargreaves' VCT specialist Ben Yearsley believes, with many early stage companies being starved of development capital as former backers have become risk averse in falling markets and a slowing economy.
The group believes that after two and a half years of struggling markets banks are no longer willing to back risky start-ups, leaving venture capitalists in an increasingly strong position to strike ever more favourable deals.
Despite this, Yearsley said, the low amount of interest the market is likely to generate will make life hard for venture capital groups to attract money in some cases to top up very small VCTs which failed to attract investors during the last tax year.
Yearsley estimates VCTs will attract less than £100m in the current tax year, making it important for investors to commit assets to trusts that are large enough to operate properly diversified portfolios. 'This is bad news for any one launching a VCT as it will be hard to get money through the doors,' Yearsley said. 'Many IFAs will be best advised to invest in top ups for their clients, as this will ensure a decent size portfolio with a good spread of investments.'
Launches include the recent Matrix-marketed Cornerstone VCT, managed by GLE, which has an emphasis on producing good dividend yield and aims to raise £20m.
Part of the problem for fund raising for VCTs is the continued perception that they are primarily tax planning vehicles, something Yearsley believes the groups should begin to move away from.
He said: 'This year should be a great year to make an investment but unfortunately most clients will be not want to go in due to perceived risk. In addition, most VCTs will concentrate marketing literature on capital gains and tax when investors should be investing for the investment opportunity, not because they have a gain to roll in.'
Groups offering top-up options include Close Development looking for £20m, Baronsmead 1 seeking £15m, Electra aiming for £10-15m, Pennine Aim 1 seeking £10m, while Quester is seeking top-up assets for Q5 VCT and Northern 3 has told Hargreaves it is considering seeking further assets later this year or early next.
Hargreaves also expects the £25m Teather & Greenwood Aim VCT, £7m Bioscience VCT and £7m ProVen Media all need to increase the assets they have to manage and will almost certainly return to the market. The British Smaller Companies Tech 2 VCT is also expected to seek to top up assets.
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