VCTs filling fast
Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.
In recent weeks we have seen increased demand for Venture Capital Trusts (VCTs).
Since the start of February, £163.7 million has flowed into VCTs. This compares to £122 million in the equivalent period last tax year, and £107 million in 2018/19.
As a result, in the last four weeks, 15 VCTs have closed to new applications. This includes the three largest offers to date – Octopus Titan VCT, Baronsmead VCTs and Albion VCTs.
In total, 17 of the 30 trusts that launched offers for subscription in 2020/21 have already closed. Investors leaving it late in the tax year may find that choice is reduced.
Which VCT offers are still available?
How much capacity is left in the VCTs currently open? The picture is changing rapidly – see the latest information at our VCT offers table.
Below we give an overview of our featured VCTs – the current offers with the most investment merit, in our view – which, at the time of writing, still have some capacity.
If you are an experienced investor looking to invest in VCTs and you see an offer you like, it may be wise considering acting now.
Draper Esprit VCT – now overallotting
The former Elderstreet VCT is now a diverse VCT portfolio with a focus on early-stage digital technology businesses. The acquisition of Elderstreet by Draper Esprit, one of the most active venture capital firms in Europe, is starting to make its mark on the VCT. Now 50% of the trust portfolio is in Draper Esprit-sourced investments, including some of the UK's fastest-growing early-stage tech companies.
This offer has raised its £5 million initial target and is now using its £15 million overallotment facility. When you invest through Wealth Club you save 2.5% on the initial charge and also receive an annual rebate of 0.10% for three years.
Maven VCTs – now overallotting
The Maven Income and Growth VCTs provide exposure to a mix of early-stage investments, many sourced from the regions, as well as Maven’s legacy investments which could potentially provide ballast to the portfolio.
The two VCTs in this offer have so far raised £23.5 million and are using their overallotment facilities. When you invest through Wealth Club you save 3.0% on the initial charge and also receive an annual rebate of 0.10% for three years.
Pembroke VCT has a distinctive investment strategy, typically backing consumer brands with premium pricing potential. A successful example is fresh pasta delivery service Pasta Evangelists, which was sold to Barilla (the world’s largest pasta producer), leading to the VCT’s first successful exit and the announcement of a special dividend. Please note past performance is not a guide to the future; dividends are variable and not guaranteed.
The offer has so far raised £11.4 million. When you invest through Wealth Club you save 2.5% on the initial charge and also receive an annual rebate of 0.15% for three years.
What is behind the increase in demand for VCTs?
Firstly, it could be due to the kind of companies in which VCTs now invest. Thanks to rule changes a few years ago, VCT portfolios increasingly include fast-growing tech-enabled businesses – many of which have seen their fortunes prosper during the pandemic.
Secondly, for the last few years, options for wealthier investors to invest tax-efficiently have been increasingly restricted. Pensions are no longer an option for many – the recently announced freeze in the lifetime allowance compounds this. Investing in buy-to-let has become less tax efficient. Taxes on dividends are also higher.
VCT, which offer up to 30% income tax relief and tax-free dividend and have a generous £200k allowance, could be an attractive alternative for experienced investors. Please remember, tax rules can change and benefits depend on circumstances.
VCT investment outstrips the last two years – while capacity is lower
The amount raised by VCT offers that opened in 2020/21 tax year now stands at £491.3 million – around 7% higher than at the same point in 2019/20, and over 3% higher than 2018/19.
Data supplied by each VCT provider / manager and collated by Wealth Club. As at 4 March 2021.
At the same time, supply is more limited than previously. Total fundraising capacity from this year’s VCT offers (including overallotment facilities) is £105 million lower than last year, and £112 million lower than the year before.
If you are planning to invest in VCTs this tax year, there is still some choice, but this could change quickly, so it may be prudent to consider acting without delay.
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.
See VCT offers still available
Read a detailed review of all current VCT offers on our website, download documents and apply online: you can save on the initial charge and, in most cases, also receive an annual rebate of up to 0.20% for three years.See all VCT current offers and apply online