By James Phillipps LeggMason Investors' Aim venture capital trust (VCT) will go ahead as plan...
By James Phillipps
LeggMason Investors' Aim venture capital trust (VCT) will go ahead as planned, despite attracting less than a quarter of its initial subscription target.
The VCT, which is to be managed by John Johnston, has so far attracted just £6.7m in subscriptions against an initial target of more than £30m but it has passed the £3m threshold LeggMason required to launch the trust.
Johnston blames bad timing for the somewhat limited investor interest so far but noted that the VCT's subscription period does remain open until 31 May.
He said: "The target was more than £30m but we were launching later into the market than most and by that time the markets had nosedived.
"What drives investor interest in VCTs is the desire to protect gains from the taxman."
Tony McGing, an analyst at GCI Financial, agreed that market conditions have hindered VCT sales as CGT avoidance becomes less of an issue due to the falling markets. He also pointed to oversupply in the market as another possible cause of slow uptake in the Aim VCT.
"Aim VCTS sold very well pre-Christmas when the market was very much stronger but now there is too much supply and not enough demand," he said.
"There was an overall product market of £700m, with about £420m of it sold over the past tax year. The previous year there was about £270m of product, all of which was sold."
Despite the negative investor sentiment, Johnston is upbeat, believing investors are behind the curve and there is value in the market
He said: "The recent market correction has brought many smaller companies and Aim quoted shares back down to very attractive valuations. The new trust will invest predominantly in Aim quoted companies."
McGing agreed that in the current climate, amid dwindling numbers of IPOs, more sensible valuations abound.
"Looking at the underlying stocks they are investing in, there are not so many coming to the market and the prices are much more sensible," he said.
The Aim VCT is to be very much growth orientated, with 70% of the portfolio invested in Aim quoted companies, including occasional forays into Ofex companies, up to 20% in smaller quoteds and up to 10% in unquoted companies.
The portfolio will hold 40-50 stocks, according to Johnston. Technology businesses will be a feature of the trust but not necessarily a dominant one, though finding possible future new industry leaders is one of the main goals of investing in Aim, Johnston said.
"Technology is a very broad word. I am upbeat about new things that save or make their customers money and that you can command a premium price for," he added.
Initially, the assets will be invested in fixed income securities pending the build-up of investor capital, up until the subscription deadline.
"While awaiting investment, monies raised will be held in a portfolio of fixed interest investments and quoted UK smaller companies," Johnston said.
There is a minimum investment level set at £3,000, with a ceiling of £100,000 in place. The initial charge will be capped at 5% and the annual fee is 2%. Initial commission is 2.25% with renewal of 0.4%.
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