Albion VCTs

The Albion VCTs are overseen by Albion Capital, a well-resourced investment manager led by experienced managing partner Will Fraser-Allen. Albion has been managing the VCTs and investing in technology and scale-up companies for over 20 years; it manages six VCTs, five of which are fundraising in the current offer.

The VCTs target an annual dividend of 5% of NAV, with each VCTs targeting two payments a year, each in a different month. This means investors could potentially receive tax-free dividends throughout the year – not guaranteed. 

Together, the five VCTs have net assets of c.£579 million (September 2023) and give investors exposure to a portfolio of around 70 companies with a bias toward growth capital investments within the fintech, software and healthcare sectors, as well as a small legacy portfolio of income-generating renewable energy investments, and cash. 

In April 2023, the VCTs’ largest holding, Quantexa, became a “unicorn” after raising $129 million at a $1.8 billion valuation. 

Over the five years to 31 December 2023, the five Albion VCTs have produced NAV total returns (including dividends reinvested) ranging from 29.6% to 43.1%. Past performance is not a guide to the future.

• Seeking to raise up to £60 million 
  
• Target dividend of 5% of NAV per annum – variable and not guaranteed 
• Minimum investment £5,000 (£1,000 per VCT)

The manager

The Albion VCTs are managed by Albion Capital Group LLP (“Albion”). Albion has been managing VCTs for over 20 years and has £945 million assets under management, of which around £650 million is held across its VCTs. 

The investment team consists of 24 investment professionals and is led by managing partner Will Fraser-Allen, who joined Albion in 2001 and is an experienced technology investor. 

The investment team contains a mix of specialist healthcare, financial technology and software investors as well as platform staff that provide investee companies with assistance in operational issues such as hiring, governance and corporate finance. An example is Partner Jane Reddin, an experienced talent director previously of EQT and Balderton Capital. Jane works with founders to build senior leadership teams, and assist with leadership development and organisational scaling. 

The investment team is supported by a further 24 dedicated operational and support staff. 

Investment strategy

Historically, the Albion VCTs followed a broad investment strategy with a blend of growth and asset-based investments (such as schools and renewable energy assets). Since 2015, they focus purely on growth opportunities. 

The team has a bias towards healthcare technology – particularly the digitalisation of healthcare – financial technology, digital risk, and AI & Data stack sectors. 

At a company level, the investment team looks for B2B businesses with a unique offering, operating in fast-growing markets. Specifically, the VCTs target companies the manager believes have reached an inflection point and require additional funding to accelerate growth.

The VCTs will invest across a range of maturity stages, from seed to Series B funding rounds. Portfolio companies are broadly split into three stages, early stage, growth, and scale up, depending on turnover. It is expected most companies will have turnover greater than £1 million, with a small proportion of earlier-stage ventures. Albion believes diversification across sectors, size, and maturity of the businesses can help build ‘all-weather portfolios’. 

Current portfolio overview

The five Albion VCTs have net assets of c.£579 million (September 2023). The net assets of each range from £92.1 million (Crown Place VCT) to £117.4 million (Albion Technology & General VCT).

Asset breakdown (% of NAV)

The combined portfolio includes around 70 unquoted companies, most of which have some degree of co-investment across the VCTs. The sector breakdown of the combined portfolio is shown below; however, percentages will vary between the individual trusts. 

Combined portfolio sector breakdown (%)

The combined Albion VCT portfolio is concentrated. Among the five VCTs currently raising the top 10 holdings account for 46.9% of net assets. The top five holdings (Quantexa, Proveca, Egress Software, Oviva and Radnor House School) account for 37.4% of net assets. Around 24% of net asset are currently held in cash or other liquid investments.

Examples of portfolio companies

Quantexa – largest holding

Big-data analytics firm Quantexa uses artificial intelligence to uncover hidden relationships and emerging risks, helping financial institutions spot and prevent fraud. Today, Quantexa’s Decision Intelligence technology is used in over 70 countries by blue-chip banks (including BNY Mellon, HSBC, Standard Chartered Bank, and Danske Bank), insurers and government organisations. 

In its latest full year results to March 2022 Quantexa reported revenues of £37.2 million, up from £17.5 million in March 2020, and £5 million in 2018. This growth has attracted significant fundraising interest. Most recently, in April 2023, Quantexa raised $129 million in a round led by Singapore’s GIC fund, alongside Warburg Pincus and Dawn Capital. The funding round valued the business at $1.8 billion. 

The proceeds are to fund the continued development of Quantexa’s artificial intelligence technology and continued international expansion alongside its partners Google, Moody’s, Accenture, Deloitte, KPMG, and EY. 

Albion first participated in a £2.7 million funding round in 2017, just a year after the company was founded, and has since provided several follow-on investments. Quantexa is currently the largest holding within the combined portfolio. The latest funding round values the combined VCT stake at £109.8 million on an investment cost of £10.1 million, an average of 19.0% of net assets (September 2023) across the five open VCTs. Past performance is not a guide to the future. 

Phasecraft – recent investment 

Phasecraft is developing software for quantum computers, with a particular focus on algorithms for materials research. These can then be used to develop better batteries, more efficient solar panels or to discover new catalysts that could improve key industrial processes. 

The company was spun out of UCL and the University of Bristol in 2018 by Toby Cubitt, Professor of Quantum Information at UCL, Ashley Montanaro, Professor of Quantum Computation at the University of Bristol, and John Morton, Professor of Nanoelectronics at UCL. 

Interestingly, the computers that will ultimately run its software do not yet exist. However, the company believes that it’s vital to develop software in tandem with quantum hardware to quickly make the most of the opportunities presented by quantum computing.

Albion originally invested in the business in 2019 via its UCL Technology Fund. The VCTs invested £2.1 million in August 2023 as part of a £13 million round alongside Silicon Valley’s Playground Global.

Exit track record

Since 1 January 2021, the six Albion VCTs have exited 19 companies, generating exit proceeds of £145 million. The most notable was the sale of the Albion VCTs’ three care homes for proceeds of over £51 million and the sales of Credit Kudos, MyMeds&Me and Phrasee. In addition, a proportion of four of the Companies’ holdings in Quantexa has recently been sold, realising proceeds of £9.4 million. 

Credit Kudos – recent exit

Credit Kudos is a Credit Reference Agency that uses financial data obtained via Open Banking APIs. 

The idea for the company came about after software engineer Freddy Kelly (co-founder) returned to the UK after working in Silicon Valley. On his return Freddy discovered his time away had severely impacted his credit history, leaving him with limited options. 

Rather than rely on assumptions, Credit Kudos allows lenders to analyse verified, up-to-date transaction data. With direct connections to the UK’s largest banks, users can safely and securely share their financial information with lenders, removing the need to upload bank statements and payslips. This not only provides a fairer credit rating for the user but also allows lenders to make quicker decisions and access a previously overlooked client base.

The business was acquired by a major US tech group in March 2022, just two years after Albion invested. The exit generated £14.4 million in proceeds for the VCTs, equivalent to a 4.8x return on cost. Past performance is not a guide to the future. 

Oxensis – previous failure

Oxensis is a deep tech business which developed high-pressure and high-temperature sensors for use in aerospace. Despite investing £5.8 million over 15 years, it took longer for the company to gain commercial traction than Albion expected. 

Albion introduced a specialist strategic investor, which was however unable to continue to support the sizeable funding requirements of the business in a form compatible with the VCT structure. As a result, Albion had to step back from the investment, selling its equity to the strategic investor for a nominal sum.

Performance and dividends

Over five years to December 2023, the Albion VCTs have produced NAV total returns (including dividends reinvested) ranging from 29.6% to 43.1% of starting NAV. Past performance is not a guide to the future. Note, we show VCT returns over a five-year period as a minimum, where possible. Where a VCT has followed the same investment strategy for longer, we also show returns over 10 years.

The five VCTs aim to pay half-yearly dividends (each calculated as 2.5% of the most recently announced NAV) twice a year, each in a different month. So, an investment in all five VCTs could potentially generate a monthly income stream throughout the year – dividends are variable and not guaranteed. 

Over the five years to December 2023, the five Albion VCTs have paid total dividends per share of between 25.4% and 37.7%.

NAV and cumulative dividends per share over five years (p)

Dividend payments in the calendar year

Dividend Reinvestment Scheme (DRIS)

The VCTs operate a dividend investment scheme that allows shareholders to reinvest future cash dividend payments in new shares if desired. As these are new shares they should be eligible for tax relief (you will need to claim this on your tax return or directly with HMRC) and the shares will count towards the VCT annual subscription limit. 

Share buy-back policy

The boards intend to buy back shares at up to a 5% discount to the prevailing net asset value. This is not guaranteed – please see the offer documents for details. 

Discount history

VCT shares are traded on the London Stock Exchange. Similar to investment trusts, the share price can fluctuate and can be different from the VCT’s net asset value (NAV), i.e. the value of the VCT’s underlying investments. The difference between the share price of a VCT, and its net asset value per share, is called a discount.

Based on data from Morningstar, the average discount to NAV as at 31 December 2023 was -5.85%. Over the previous five years the average discount to NAV was -5.70%.

The discount history is based on the closing share price of the VCT at the end of each month, divided by the latest net asset value at the time. Past performance is not a guide to the future. Investors looking to sell their VCT shares may get a better price using the VCTs’ share buyback facilities, although this is not guaranteed.

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. 

VCTs 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. 

To retain the tax benefits, VCTs should be held for at least five years. If you sell VCT shares and reinvest in new shares of the same VCT (including any mergers) within six months, tax relief can be restricted. Tax rules can change and benefits depend on circumstances.

Charges and savings

A summary of the main charges and savings is shown below. The net initial charge shown includes the Wealth Club saving and any early bird discount. The investment may have additional charges and expenses: please see the provider documents including the Key Information Document for more details, offer price and share allotment calculation methodology.

Please note, capacity – for the offer or any early bird savings – can be reached early, and we may not be notified of this by the VCTs in real time.

Annual rebate when you invest through Wealth Club

The Albion VCTs include an annual rebate for Wealth Club investors, payable for the first three years. 

This is a rebate of our renewal commission and should be equivalent to a percentage (shown in the table above) of your subscription. Terms and conditions apply.

Deadlines 

The offer is now closed.

Our view

Strong performance by the VCTs’ largest holding, Quantexa, shielded investors from a volatile period for growth assets in 2023, and somewhat overshadowed the positive contributions from the VCTs’ 2nd-4th largest investments (Proveca, Egress Software, and Oviva). 

The combined VCT portfolio now shows a strong bias towards fintech, software & technology and healthcare sectors (64.1% of net assets), an area of strength for the VCTs, and Albion continues to build on its reputation as a backer of some of the UK’s brightest startups.

By investing across the Albion VCTs, investors gain access to a portfolio of growth capital investments and a small legacy portfolio of income-generating, asset-based and renewable energy investments, as well as cash. 

The trusts aim to pay twice-yearly dividends on different months of the year, so, if all five VCTs are held, investors could potentially benefit from tax-free dividends throughout the year. 

In our view, the ability to access a growing portfolio of technology and healthcare businesses combined with the potential for a regular income stream, makes this a compelling offer for consideration: investors should form their own view.

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.