according to allenbridge, taking into account VCTs' tax shelter properties, the asset class has performed exceptionally over the long term
Prospects for profit and value growth are high, according to the latest research from Allenbridge which, it argues, makes a good case for venture capital trusts (VCTs).
David Knight, director of tax shelter research at Allenbridge, said looking at the long-term performance of VCTs shows many have performed well.
VCTs, he continued, are designed as long-term investments by nature of the tax concessions they attract and factoring in the tax sheltering properties of VCTs, the absolute performance is exceptional he said.
Despite this, he said the background for investment is not entirely rosy.
'No one expects this to be a bumper season for raising funds,' Knight said.
'The markets have languished for such a time that most investors have little faith in equities. There are likewise few capital gains from the markets to be sheltered and people whose incomes depend on performance bonuses are feeling the pinch as well. In addition the spare cash has been heading for residential properties over the past two years.'
Despite this the argument for VCTs is still strong, he argued, as investments in smaller companies can be made at lower prices than before. Allenbridge's research shows the best performing funds are, on the whole, the older funds.
Knight said this is explained by the fact that the older VCTs had the chance to benefit from the effects of the earlier bull market with their performance figures propped up by their earlier performance. The VCTs started towards the end of the boom have not had this advantage and consequently have not done as well.
Of all the surveyed trusts in each of the VCT generations the Foresight Tech VCT was the best performer, achieving an internal rate of return of 22.2%.
The internal rate of return calculation averages out the trust performance over time and, Knight said, giving a clearer picture of performance than simply adding dividends paid to the net asset value of an investor's funds.
Knight said the Foresight Tech performance comes largely from the fact that it was launched in the tax years 1997/1998 and 1998/1999, benefiting from the height of the tech boom.
However, he pointed out, this was not just serendipity as of the eight VCTs launched in the same period only three have managed positive internal rate of returns.
As the market stands at the moment two new VCTs have opened ' Cornerstone, managed by GLE and aiming for £20m and the Baronsmead VCT 'C' Shares, a £14m top-up to the first Baronsmead VCT launched seven years ago.
The Oxford Technology VCT remains open from last year while the T&G AIM VCT 'C' Share is expected to open shortly.
In addition four VCTs are open for top-ups ' the Pennine AIM VCT 'C' Shares which is managed by Rathbones and aiming for £10m, the Quester 5 VCT which has been re-opened from last year and is looking for a further £15m, the Close Brothers development VCT 'C' shares and the Northern 3 VCT which is aiming to add a further £1.39m.
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