FSA decision on VCTs REITs ETPs

Fund managers have welcomed the news the FSA is re-thinking proposals to restrict the promotion and sale of venture capital trusts (VCTs), real estate investment trusts (REITs) and exchange traded products (ETPs).

FSA decision on VCTs REITs ETPs


In November last year the FSA proposed a ban on sales of unregulated collective investment schemes (Ucis) to UK retail investors, meaning that these products would only be accessible to sophisticated investors. The blanket ban would have included VCTs, REITs and ETPs.

The move came as a result of an investigation which revealed that improper advice was being given about these investments and that in some cases pensioners had been advised to invest their wealth in a single, illiquid Ucis.

However, following the consultation period, the FSA has stated that these products will now be excluded from the ban subject to approval by the board, scheduled for April.

Commenting on the turnaround, Patrick Reeve, managing partner at Albion Ventures stated: “The FSA has listened to reason. VCTs should not be put in the same basket as other riskier investment products. As well as benefiting from strong standards of corporate governance and publicly listed shares, VCTs have demonstrated 17 years of successful returns to investors.

“This decision is also good news for the UK economy. VCTs provide a much needed source of finance to growing businesses at a time when traditional sources of financing are very hard to access.”

Citing the benefits for the investor, Brett Williams, managing partner at Old Burlington Partners said: “We hope the FSA’s intention to look more closely at this area will provide clarity for advisers and ensure that they don’t rule out products that could be appropriate for a sizeable number of their clients to consider as part of a balanced portfolio.

"Investors have been disappointed with the returns delivered by traditional asset classes in recent years and are looking at alternatives. EIS, and other investments delivered through VCTs, offer the potential of significant growth to portfolios."