Review: Mobeus VCTs
Some managers have an extremely loyal following amongst VCT investors. Mobeus is an example.
The current offer raised £4 million within two working days of it opening. Two years ago the four Mobeus VCTs raised £80 million. Around half came from existing shareholders.
Why such loyal support?
A history of healthy returns
One reason could be the track record. Historically, the Mobeus VCTs have handsomely rewarded investors. If you had invested £10,000 in the combined 2010/11 offer, by June 2019 you would have received approximately £9,800 back in dividends alone, before tax relief. If you had invested two years ago (2017/18 offer) you would have received around £1,950.
Dividends are variable and not guaranteed. Tax rules can change and benefits depend on circumstances. Past performance is not a guide to the future.
Can the good times continue?
Only time will tell. That said, if you look at what has driven performance, an encouraging picture emerges, in our view. The main two contributing factors are gains from exits and income the VCTs receive.
Over the past five years, Mobeus has realised 17 investments. Of these, all but one have been profitable and have generated a total cash gain of £134.4 million, at an average return multiple of 2.7x. This includes the holding that was sold at a loss of £500k.
In addition, historically Mobeus primarily invested in management buyouts of larger, established and generally profitable companies (Virgin Wines is an example). The deals usually included debt and equity. This is no longer permitted under current VCT rules. However, some of those investments are still in the portfolio and loan repayments have so far proven a valuable source of income for the VCTs. Indeed, income generation is one of the main drivers of performance in the last five years.
Remember, past performance is not a guide to the future.
What does the current portfolio look like?
The four VCTs are very similar – they tend to co-invest in the same deals, albeit usually in different proportions.
If you invested across all four in the current offer, you would access a fairly concentrated £245 million portfolio (as at October 2019) comprising around 43 companies.
Of these, 28 are older-style investments (management buyouts) and 15 are recently added growth capital companies.
The latter are younger and by nature riskier. Mobeus tends to prefer companies that can generate sufficient revenues and ultimately profits to support their growth, rather than having to rely solely on raising further investment capital.
Indeed, across the entire portfolio, nearly half of the companies are profitable.
Out of the most recent 15 growth investments, three are profitable and a further two are planning to deliver profitability in their current financial year, although there are no guarantees.
Please remember VCTs are by nature high risk and only for experienced investors. You should not invest money you cannot afford to lose.
Watch a video interview with Trevor Hope of Mobeus Equity Partners:
We believe this is one of the strongest VCT offers open or due to open this year from a long-established and respected manager.
It gives investors the combination of an attractive income stream supported by the VCTs’ management buyout investments, and the potential for capital growth through newer earlier-stage growth investments.
The team has a strong exit track record. It has repeatedly realised investments at a premium to the latest recorded valuation. Please remember, past performance is not a guide to the future.
As the portfolio balance shifts more in favour of younger companies, dividends are likely to be more volatile. That said, the considered investment strategy adopted by the manager and the early performance indicators are encouraging.
MPB Group – recent investment
While studying at the University of Warwick, Matt Barker began selling second-hand cameras to finance his studies. After graduating, he rented a small office in Brighton and launched MPB.
Today MPB trades thousands of cameras and lenses every week, across Europe and the US. MPB’s platform manages the entire experience and offers a six-month warranty on every item. Its technology automates product listings and provides dynamic price updates to give users a more transparent and consistent service.
The quality of MPB’s offering is rapidly gaining traction with consumers, and in its latest set of accounts, the company grew revenues to £31.9 million, up from £21.7 million.
Mobeus has invested in each of the company’s series A, B, and C funding rounds. In total the VCTs have invested £7.1 million and have co-invested alongside Beringea and Acton Capital.
This review first appeared in our investment newsletter published on 17 November 2019. Please remember, VCTs invest in smaller companies, which are high risk: you could lose all the capital you invest.
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.
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