VCT assets hit peak

Assets in venture capital trusts (VCTs) have hit an all-time peak.

VCT assets hit peak


Since VCTs were established in 1995, assets have never been as high as they are today, the Association of Investment Companies (AIC) has said.

This comes despite confusion earlier this year about whether or not VCTs would be caught up in the regulator’s crackdown on marketing of unregulated collective investment schemes (Ucis) to retail investors.

Looking at the AIC data, which shows that funds under management in VCTs increased by £19m during the first six months of 2013 – covering the stretch when the sector was awaiting clarity over the Ucis promotions ban from the Financial Conduct Authority, investors seem to have shrugged off the industry’s fears that they could eventually be unable to invest in the tax-efficient vehicles.

The AIC said that total funds under management in VCTs stood at £2.89bn, as at 5 October, while funds raised as a result of new share issues (including enhanced share buybacks) amounted to £94m.

Critical for SMEs

Ian Sayers, the AIC’s director general, said that VCTs continue to play a vital role in supporting small businesses, which since the credit crisis have faced a squeeze on lending from banks.

“We are seeing solid dividends among the established VCTs which, together with more consistent performance, reflect the sector’s increased maturity,” Sayers added.

Also commenting on the numbers, Bestinvest, the online provider of investment and wealth management services, said that VCTs were currently in a “sweet spot”, with their managers reporting strong investment pipelines because of the economic recovery in the UK.

As a result, this means that the prospects for exits from VCTs should also improve and this could trigger a rise in special dividends, said Jason Hollands, Bestinvest’s managing director.

Hollands added: “The market is also benefiting from buoyant investor demand, with the upper rates of tax remaining high in the UK and the impending reduction in the annual and lifetime pension allowance.

“As a result, more experienced investors are turning to VCTs to supplement their core pension and ISA investments. While they are not a mass market product, VCTs can play a helpful role in an income plan given the very attractive, tax-free yields on mature VCT portfolios.”



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