Review: University of Oxford Innovation Fund EIS
This offer is now closed – 20 Sep 2019
This fund is now oversubscribed. Parkwalk also manages the Parkwalk Opportunities EIS, which invests in university spinouts mainly from the universities of Oxford, Cambridge and Bristol. The fund is currently open for investment.
University of Oxford Innovation Fund V is a collaboration between Parkwalk and Oxford University Innovation, a subsidiary of the University of Oxford. The fund gives private investors access to early-stage and startup opportunities spun out of Oxford University. Wealth Club is the only non-advised broker to offer this.
This fund is managed by Parkwalk Advisors (“Parkwalk”) with Oxford University Innovation (OUI) as the Portfolio Advisor.
Parkwalk is an experienced and award-winning EIS fund manager. Founded by Alastair Kilgour and Moray Wright, Parkwalk is the UK’s most active investor in the university spin-out sector. The companies in which it has invested have raised over £1 billion in funding since 2010. This has been achieved through its relationships with UK Russell Group Universities and increased resourcing after a merger with IP Group, a leading FTSE 250 listed IP commercialisation company.
Oxford University Innovation (OUI)
Oxford University is the largest research-based university in the UK and is a global leader in innovation. However, one of the biggest challenges for the university is transferring research into commercial ventures. To address this problem, Oxford University established Oxford University Innovation in 1987.
Since its launch, OUI has created over 100 new technology companies, eleven of which are currently listed in London and New York. OUI offers a full range of services for prospective academics including its own consultancy services as well as a patent and licensing department. On average, OUI files one patent application each week with around 4,000 listed in total. As the portfolio advisor, OUI will source and evaluate appropriate opportunities for the fund.
This is the fifth iteration of this fund – the first launched in 2014.
The fund looks to invest in a number of opportunities presented by OUI – typically five to seven. Outside of its technology stipulation, investee companies can vary widely both by sector and stage of development. Investments within previous funds have focused on areas such as vaccines, robotics, and energy generation.
The majority of deals are expected to be EIS, however, there could be some exposure to SEIS. Historically, the funds have been split approximately 90% EIS and 10% SEIS, although this is not guaranteed.
Parkwalk aims to select portfolio companies across a number of sectors to offer investors some diversification. Companies should address a significant issue and ideally have proven technology. OUI has good visibility of its future deal pipeline which is expected to comprise both new spin-outs and existing portfolio companies.
The fund may invest alongside other university-controlled funds in addition to seeking grant funding from suitable institutions. Establishing follow-on funding is essential to bridge companies across the funding gap. So far, companies held in previous funds have raised over £2 billion in external investment.
The fund’s target return is unspecified, but the manager will only consider investee companies it believes to have the potential to return five times the original investment. Remember, returns are not guaranteed.
Parkwalk will consider a variety of exit routes, including trade sales, secondary sales, IPOs, or potential sales to other Parkwalk or IP Group managed funds. Exit options and timeframes are not guaranteed.
OUI has launched four iterations of the University of Oxford Innovation Fund, investing in a total of 26 companies since 2014. Of these, one investment has been completely written-off, one sold for a 60% loss and another valued lower than cost. The valuations for the remaining companies are higher than cost or unchanged. However, please note that past performance is not a guide to future returns.
Current fund valuations for the first three funds are displayed below. As the first fund was launched in 2014, five-year performance data is not available. The five-year performance of all Parkwalk Funds, including the Oxford Funds, is also shown.
Valuation of Oxford Innovation Funds to August 2019
|Cash on cash return||Return after tax relief and fees|
|UOIF I (2014 to 15)||98.4%||115.0%|
|UOIF II (2015 to 16)||230.6%||268.4%|
|UOIF III (2016 to 17)||163.6%||188.8%|
|UOIF IV (2017 to 18)||n/a||n/a|
Source: Parkwalk Advisors, as at August 2019. Net includes EIS tax relief and fees (excluding potential performance fees). Past performance is not a guide to the future. Annual performance of all Parkwalk funds is shown below.
Source: Parkwalk Advisors. Valuations as of 30 June 2019, on all investments made across all funds per tax year. Total Return includes realised returns and unrealised returns. Performance figures exclude performance fees and tax relief. Returns calculated using Parkwalk's own valuations. Please note, data for the 2017/18 tax year is not yet available. Past performance is not a guide to the future.
The companies described here are from previous iterations of the fund and may not be included in the Fund V portfolio. They are outlined to give a flavour of the types of companies an investor might expect.
Animal Dynamics designs systems inspired by the study of the evolutionary biomechanics of animals– such as unmanned aerial vehicles (UAVs) and small scale drones. The company looks to generate more efficient and better-performing vehicles by understanding natural movement patterns.
For example, Skeeter, is based on the body of a dragonfly. Skeeter uses flapping ‘wing’ propulsion to maximise efficiency and allows for gliding and tolerance to difficult weather conditions. Compared to other existing small unmanned aircraft systems (UAS), Skeeter can fly for longer distances on less power over a greater range of conditions.
In addition to Skeeter, the company has two other projects, Stork and Malolo. Stork, the most advanced prototype, is currently at the trial stage whereas Malolo is still under development.
Parkwalk first invested into the company through the Oxford Innovation II Fund in 2015. It was also involved in subsequent funding rounds. The company was sold through a secondary sale in March 2019, generating a return of 6.9x for investors after three years. Past performance is not a guide to the future.
Oxford Innovation Fund IV (and University of Oxford Isis fund ii) invested in Oxford Endovascular, which has created a new treatment for patients with brain aneurysms. A brain aneurysm is a bulge that forms in the blood vessel of the brain that could lead to severe health issues and possibly death.
Almost 1/3 of patients who develop aneurisms cannot be treated with current technologies. Oxford Endovascular’s patented design uses a small ‘mesh’ of metal to create a faux blood vessel, allowing blood to be diverted away from any damage, allowing the aneurysm to heal.
The company raised £2 million through OUI, Oxford Sciences Innovation PLC and private investors. The company also recently won one a non-dilutive grant of up to €2.96 million from the European Commission.
Oxford Brain Diagnostics
A result of an 8-year collaboration between founders, Professor Steven Chance and Profession Mark Jenkinson, Oxford Brain Diagnostics (OBD) has developed a new method for diagnosing Alzheimer’s Disease.
Using only MRI scans, the founders have developed an approach that provides an index of brain health. These scans can then not only provide quantitative results to indicate the likelihood of a patient suffering from Alzheimer’s but can also detect symptoms far earlier than current diagnostics methods. The treatment will initially be targeted at Alzheimer’s Disease but could also have the potential to be used for other brain conditions as the company expands.
As is to be expected, not all investments have worked out. Theysay is one example. A spinoff from the Department of Computer Science, Theysay developed advanced language processing software for real-time sentiment analysis. The technology could be used to measure the opinions, mood and intent of customers, enabling businesses to handle feedback and identify trends more effectively.
The company originally received £500,000 in funding from IP Group in 2012 and £1 million from Parkwalk in 2014. However, after slower than hoped commercial progress the company was acquired by Aptean, a leading software provider, in 2018. This sale generated a loss for the fund.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
EIS investments are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
Tax rules can change and benefits depend on circumstances.
This EIS fund invests in early-stage businesses which are more likely to fail than larger ones, so you should expect a number of failures in the portfolio.
Charges and savings
A summary of the main charges and savings is shown below. Some of these will be payable by the investor, whilst others by the investee companies. The investment may have additional charges and expenses: please see the provider documents, including the Key Information Document, for more details.
|Full initial charge||5%|
|Wealth Club initial saving||—|
|Net initial charge through Wealth Club||5%||Annual management charge||1.5%|
|Performance fee||20%||Investee company charges|
More detail on the charges
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.