VCTs raise £882 million – third highest year on record

Funds raised by Venture Capital Trusts (VCTs) reached £882 million in the 2023/24 tax year, according to AIC figures just released — the third highest year on record. 

The sum, which includes dividend reinvestment, brings the total for the last three tax years to £3 billion.

VCTs: amount raised by tax year from 1995 to 2024

Chart: VCT funds raised 1995 to 2024 by tax year

Source: AIC, to 5 April 2024.

After a somewhat slower start, the pace of funds raised accelerated as tax year end drew closer, with the continuing tax pressure on higher earners and wealthier investors contributing to demand. A total of £807.2 million was raised through new investments, before taking into account dividends reinvested. 

10 of the year‘s 26 offers reached capacity and closed early. The year also saw two new VCTs complete their first fundraise (see more below).

Will Fraser-Allen of Albion Capital, whose VCT offer raised £60 million across five VCTs this year, commented: “Despite the challenging macroeconomic and geopolitical environment, it is encouraging to see the VCT market raising the third highest annual amount to date.”

Richard Stone, Chief Executive of the AIC (Association of Investment Companies) added: “The continued strong fundraising by VCTs will be a great benefit to the UK’s innovative young businesses in a challenging environment.”

See how the fundraising progressed:

Source: Wealth Club, based on figures provided by VCT managers during the course of the year (these do not include dividend reinvestments).

How much did each VCT offer raise?

The year’s largest fundraise was the £106.8 million raised by Octopus Titan VCT. This was an unusually subdued year for the VCT, which raised a record £237 million last year. 

Its sibling, Octopus Apollo VCT, raised a total of £90 million during the tax year — a £40 million extension to its previous offer from April to September, and a further £50 million offer between November and March. Altogether, manager Octopus Investments raised £229.5 million across four VCT offers during the tax year (Titan, Apollo, Future Generations and Octopus AIM VCTs).

British Smaller Companies also raised £90 million including overallotment, reaching full capacity in February. 

David Hall, YFM

“The market has not been without its challenges this year and we’re really pleased at YFM and British Smaller Companies to have received investment that meant we’ve achieved our £90 million fundraising target.

“It is really important to have sufficient funds to not only support our existing portfolio, but to meet the demands of new investments with an ever-increasing number of entrepreneurs seeking capital for their growth. 2024 won’t be without its challenges for them, but if we can give them the investment and networks of expertise to help them scale, we should all benefit.”

David Hall YFM Equity Partners, manager of the British Smaller Companies VCTs

The Albion VCTs and Northern VCTs both comfortably met their £60 million fundraising targets, closing in March. Will Fraser-Allen of Albion Capital: “The Albion VCTs’ £60 million target was oversubscribed, which is a strong endorsement for the Albion team, and it will provide critical growth capital for the young and innovative businesses we support. There is a substantial opportunity to back the category-leading software and healthcare businesses of the future.”

Other notable fundraises include:

  • Unicorn AIM VCT had the fastest fundraise – £20 million in 20 days, closing in February

  • Two new VCTs launched this year, both from managers with an EIS track record: Fuel Ventures raised £8.4 million for its new VCT, while Praetura Growth VCT reached £3 million in time for tax year end.

  • Two VCTs managed by Foresight were among the first to fill: Foresight Enterprise VCT raised £30 million and closed on 2 January, while Foresight VCT reached its £25 million capacity on 24 January. Bethany Dudley of Foresight Group, commented: “Where there has been fundraising success, it has been for VCTs that have been able to generate successful exits against a backdrop of subdued M&A activity in UK markets.”

Play the chart to see how the offers that opened in 2023/24 progressed:

Source: Wealth Club, based on figures from VCT managers for share offers opened during 2023/24. This chart does not include the £40m raised by Octopus Apollo VCT earlier in the tax year, a continuation of a previous offer. The size and speed of a VCT’s fundraise does not necessarily indicate how well the investment will perform in the future.

What might the outlook for VCTs be?

2024/25 looks set to be a year of uncertainty for UK investors. There will be an election at some point, and taxes may well continue to rise regardless of who wins.

On a brighter note, both the main political parties have stated their support for VCTs – seeing them as a key to supporting economic growth and making the most of the UK’s entrepreneurial flair. 

Bethany Dudley, Foresight Group, commented: “VCTs continue to play a vital role in supporting the UK’s fast-growing companies and help to create jobs and provide economic and social advantages at a time when many parts of the UK continue to feel the ongoing impact of the cost-of-living crisis.”

With capital gains tax and dividend allowances being cut again, and tax thresholds expected to remain frozen, the tax burden on wealthier individuals will continue to grow. Due to government recognition of the relatively higher risks, VCTs continue to be one of the few tax-efficient investments available to the highest earners, and are likely to remain very popular as a result.

Current VCT investment opportunities

Although many offers have closed, several VCTs remain open into 2024/25. 

If you are considering investing, it may pay off to do so at the start of the tax year. For example, you could potentially start receiving tax-free dividends earlier – dividends are variable and not guaranteed. Moreover, income tax relief of up to 30% could be paid to you during the year, rather than reclaimed afterwards via your tax return. Tax rules can change and benefits depend on circumstances. 

Before investing, please read the offer documents to form your own view. If unsure, seek advice.

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination. 

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