Octopus Investments’ Octopus Titan Venture Capital Trust (Titan VCT) has raised a record GBP100 million. This is the largest ever fundraise for Titan VCT, the UK’s biggest Venture Capital Trust (VCT).
The news follows swiftly on the heels of the latest figures from the Association of Investment Companies, which revealed that the VCT sector raised GBP457.5 million in the 2015/2016 tax year – the highest amount since 2006.
This is further evidence of the growth in investor demand for VCTs and mirrors recent market commentary. As new restrictions on lifetime and annual pension investment limits come into force from 6 April, increasing numbers of people are looking for complementary options for their retirement planning. With the classic buy-to-let investment also coming under pressure from the chancellor, many may be looking to VCTs as a complementary way to help with retirement plans in a tax efficient way.
This increase in investor demand also signals a shift in how VCTs are being perceived, with increasingly mainstream interest in making long term investments into early stage companies. The idea of backing exciting young companies via a VCT has engaged many new investors with the appropriate risk appetite.
Since Titan VCT was first launched in 2007 it has focused on backing dynamic young companies with talented management teams and the potential to build the businesses of tomorrow. For those comfortable with the risks of investing in early stage smaller companies, the potential opportunity to share in the future growth of these businesses within the tax efficient wrapper of a VCT has proved attractive. Previous high profile Titan VCT success stories include Zoopla, Secret Escapes and most recently SwiftKey which was sold to Microsoft in February 2016.
Stuart Lewis (pictured), Business Line Manager for VCTs says: “This record fundraise represents a tipping point for the industry. Against the backdrop of significant pension reform, we are seeing more and more people looking for alternative ways to complement their existing retirement planning.
“67 per cent of the investors in this fundraise were new to Titan VCT, demonstrating a real surge in interest from a wider group of people. VCTs are now seen by many as a powerful planning tool and can be an attractive way to gain access to the growth potential of smaller, early stage companies.
“With 70 per cent of all Titan VCT investors in this fundraise investing through a financial adviser, I would urge everyone to seek professional advice to help them understand their options and develop a plan for their future.”
VCTs were introduced by the government in 1995 to encourage much-needed investment into smaller companies, driving job creation and economic growth in the process. They offer a number of tax incentives for those investors comfortable with the associated risks of smaller company investments, including up to 30 per cent upfront income tax relief providing that shares in the VCT are held for at least five years, as well as tax-free dividends and tax-free growth. Whilst these incentives are subject to certain conditions they remain very attractive.
