Venture capital trusts and venture and development investment trusts have been outperforming the FTS...
Venture capital trusts and venture and development investment trusts have been outperforming the FTSE and most other investment and unit trusts during the past 10 years, but that record might be about to end according to Northern Venture Managers VC manager Alastair Conn.
The Northern Investors Company investment trust is set to end its full year on 31 March, but its last publicly announced net asset value (NAV) was lower than at the same time last year.
Admitting the market was not in the trust's favour, Conn said the company would "be pushed" to beat last year's NAV.
Venture trusts are somewhat insulated from the markets because of the large non-listed content of their holdings.
But the dearth of opportunities to sell off holdings through initial public offerings and the far lower amount of interest in sectors such as technology compared to two years ago means even NAVs of non-quoted holdings are under pressure.
Historically Northern Venture Managers' returns on investment has averaged 20%, but a sustained period of low inflation could returns below the 15%-20% Conn hopes will be the case during the next decade.
"We hope to sidestep the equity markets," he says, while also pointing out that a longer-term lack of IPO opportunities inhibits the company realising gains made - The Norther Investors Company is still carrying companies in its portfolio that it wanted to get rid of some time ago, but could not because nobody is buying into IPOs.
This leaves trade sales as the other exit to investments - the preferred route for all venture capitalists Conn adds - but it is not something that will necessarily boost NAVs in the short across the sector.
Recent events have shown that the VC sector is under attack from more widespread scepticism in its ability to produce returns.
Gartmore pulled the launch of its Premier VCT after it was unable to raise enough money.
That followed the withdrawal of the Pathway One VCT after it too failed to raise the minimum deemed necessary to make the fund viable.
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch
To drive progress