By Robert Stock Some VCTs currently available and others being launched into the market lack credib...
By Robert Stock
Some VCTs currently available and others being launched into the market lack credibility and are tantamount to opportunist offerings, according to Hargreaves Lansdown.
The group has completed a guide to VCTs for its clients and is intending to make it available in the New Year.
Ben Yearsley, author of the guide and investment manager at the group, said: "In the case of some VCTs they are only being launched for the sake of launching the trust with the perceived knowledge that it will probably sell out due to last year's popularity."
Yearsley added there has been a shift in the date that VCTs are launched with product providers preferring to go to market earlier in the year from past years' traditional March launch.
He said: "More than £270m was raised in the 1999/2000 tax year and there was a shortfall as investors clamoured to invest in the final weeks of the year.
"It was estimated that about £30m of investor money did not make it into VCTs last year as demand far out stripped supply.
"Many VCTs were selling out three weeks into March. To combat this, many trusts are launching earlier this year. Six VCTs have been on offer and three have already sold out this year raising over £100m."
Yearsley said some of the VCTs launched this year look like "me too" trusts, making it difficult for investors to differentiate between them.
Of the 15 on offer so far, Hargreaves Lansdown believes only a handful are worthwhile investment opportunities.
In his guide Yearsley said the Singer & Friedlander VCT 3 is good as a lower risk investment, while the Trivest VCT multi-manager product is a good option for novice investors.
However, both trusts feature charges that are at the higher end of the VCT scale, he said.
He offers a more neutral opinion on the Northern Aim VCT, the British Smaller Technology Companies 2 VCT and Capital for Companies VCT.
Among the launches that Yearsley criticises is the e-Technology VCT top up offering early in 2001.
He said the management team is untried, the sector is extremely volatile and there are strong risks associated with both unquoted and quoted technology companies.
Yearsley said: "We were not keen on the first issue of these shares in March 2000. There is no reason to be any more positive about this top up."
He also criticises Close Technology & General VCT on two points.
Firstly that the manager intends to use the full three years to invest the fund and secondly Close's other non-Aim VCTs have returned "lacklustre" performance.
He welcomed the departure by Aberdeen Murray Johnstone from its usual generalist approach to VCTs with the two tandem VCTs that it is launching in January.
However, he said it was moving into an area where other managers already have good contacts.
He said: "I am not convinced about their credentials in this area and I think that there are better opportunities available."
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