Industry Voice: Looking for diversification? Consider VCTs

Venture capital trusts have a number of characteristics which allow them to complement a wider portfolio, says Puma Investments' Nadia Halila

clock • 1 min read
Nadia Halila, Puma Investments
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Nadia Halila, Puma Investments

Venture capital trusts (VCTs) act as a strong diversifier to conventional equity and bond portfolios, because the investee companies have different dynamics from large FTSE companies.

Different VCT providers can also target different sectors and different risk profiles. Some will aim to provide high-capital growth but with more risk, while others will target a steady tax-free dividend stream. They will also hold companies at different stages of development. 

Nadia Halila, senior business development manager at Puma Investments, says: "Like most VCT providers, we're often used alongside other VCTs. Advisers don't usually pick one fund for an investor.

"There are very clearly diversified VCTs in different sectors, different stages and how many holdings they've got. If an investor is spread across two, three, four VCTs, that will help to mitigate risk." 

That said, Halila argues that VCTs can be less volatile than people believe. She points out that the Puma portfolios have generally done well during the pandemic, in contrast to listed markets, which have been volatile.

While VCTs may invest in smaller companies, the VCT manager will be providing help and guidance on growing the business, which can help it avoid many of the pitfalls that might derail it.

Puma invests in scale-up businesses rather than start-ups, because that is where its managers believe they can add the most value, and also help minimise risk for investors.

For more on the benefits of investing in VCTs, read Puma's exclusive Spotlight guide

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