Andrew Ferguson, partner at Maven

VCTs still finding opportunities in a challenging environment

At a time when investors are hungry for income, some 59 per cent of the Association of Investment Companies’ member venture capital trusts are yielding over five per cent.

The average VCT is up four per cent over one year, 21 per cent over three years, two per cent over five years, and 61 per cent over ten years.

Despite the difficult economic environment, a recent AIC survey of VCT fund managers found that 70 per cent of VCT managers’ investee companies were net recruiters last year.
 
The AIC hosted a press roundtable lunch on the outlook for VCTs with David Glick, director of Edge Performance VCTs, and Andrew Ferguson (pictured), partner at Maven. Encouragingly, Ferguson is finding that “the UK is full of good quality SMEs, with strong management teams that warrant investment and support.”  Their views have been collated alongside other managers from the sector.
 
Chris Allner, partner, Downing, says: “We see particular opportunities for investment in the leisure and education sectors and have undertaken a number of buy and build strategies in health clubs, schools and children’s play areas.  With the recent focus in the media on childcare provision, we are also investors in children’s nurseries and see this as an area of future investment, working alongside established reputable operators.”
 
Glick says: “This is perhaps the perfect time to invest in a VCT. Growing companies are finding it difficult to raise bank borrowing, so deals are priced competitively.  An upturn in the economy will happen in the next investment cycle, and history shows venture capital investments made at the right time outstrip the best investments made at the wrong time. Meanwhile the low interest rate environment makes the tax advantages of VCTs increasingly attractive to investors. Combine that with a specialist focus on a growing sector like entertainment and media and the prospects are very good indeed.”

Paul Latham, managing director at Octopus Investments, says: “The support offered by VCTs to the UK’s smaller companies market should not be underestimated. With access to funding still a challenge for most small businesses, VCTs can continue to play a vital role in helping UK businesses grow to become market leaders and world beaters. A recent survey we conducted demonstrated our investors like to feel like they’re playing a role in the recovery of the UK economy, thanks in no small part to their VCT investment.”

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