By James Phillipps Friends Ivory and Sime (FI&S) has launched its third Baronsmead venture capital t...
By James Phillipps
Friends Ivory and Sime (FI&S) has launched its third Baronsmead venture capital trust and, although it is being billed as generalist, 50% of the new VCT will be invested in technology, media and telecoms.
Baronsmead VCT 3 will invest in high growth sectors in a bid to maximise long term capital growth, focusing mainly on unquoted companies. The remaining 50% of the portfolio will be diversified into life sciences and healthcare, business services and consumer markets.
VCT investor relations manager Michael Probin played down the risks of such a heavy tech weighting. He said: "When we invest in technology companies we are not taking a technology or science risk. We invest once a company has gone through its product development and testing stage."
Probin acknowledged the sector has largely been an area to avoid of late, but believes FI&S's strategy of targeting technology-enabled companies seeking second or third round funding will mitigate risk.
"Lots of other VCTs are going in at earlier stages, but we are investing in established and profitable companies, so it is a different type of risk profile," he said.
The VCT will therefore not be investing in IPOs, preferring profitable companies that already have shareholders on board. Probin said: "We will not invest in the early stages, normally in the second or third round of financing. We will not get the entire uplift from the beginning but we will not be exposed to the same level of risk either."
Baronsmead VCT 3 opened for subscription on 15 January, with FI&S looking to raise up to £30m. The minimum investment is £3,000, which can be invested in this tax year or the following one. Launch costs are capped at 5% of the gross funds raised and split between 3% commission for IFAs and 2% for launch costs. Total costs to clients are capped at 3.5% pa, incorporating administration fees and an annual management fee of 2% initially, rising to 2.5% after 2004.
The same private equity team that manages Baronsmead 1 and 2 will manage the forthcoming VCT 3 offering. Probin said: "Baronsmead 3 is seen as part of a family of VCTs run by the same managers and will co-invest in the same companies as other funds we manage here."
Research commissioned by FI&S into attitudes toward investing in smaller companies has shown that interest in investing in such potentially high risk ventures more than doubled when investors stood to benefit from substantial extra tax savings.
Mike Hare of Market Minder who carried out the research for FI&S said: "The level of interest is substantially higher if such an investment was to have a substantial tax break attached to it."
Describing the sample used in the research, Hare said: "It is specifically those adults responsible for their own financial affairs that are the people most likely to be in a position to invest."
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