The Guinness EIS fund looks to offer scale-up capital to later-stage ventures. While any EIS investment is high-risk, Guinness targets more mature businesses. Each investee company should be generating revenue as a minimum requirement, preferably £1 million or above, with evidence of durable revenue streams – not guaranteed.
The EIS fund is managed by an experienced team and is backed by an established parent company, Guinness Asset Management. Under its current growth capital strategy, established in 2018, the fund has deployed more than £100 million into 36 investee companies. The fund has had some early success with three exits returning £19.2 million to investors, an average 1.54x realised return before tax reliefs. Please remember past performance is not a guide to the future.
The fund has four tranche closes per tax year and targets full deployment within the same tax year. Investors can expect at least 10 companies per tranche – not guaranteed.
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- Established EIS manager
- Targeting a portfolio of diverse businesses
- Evergreen offering
- Focus on later-stage, revenue generating companies
- Targets at least 10 investments per portfolio, not guaranteed
- Target return of £1.25 per £1 invested after 4-5 years, not guaranteed
- Quarterly closes
- Minimum investment of £20,000, you can apply online
Guinness Asset Management Ltd (“Guinness”) is one of the largest EIS fund managers operating in the UK. The business has raised and invested over £200 million across its EIS funds since 2010.
An industry stalwart, Tim Guinness has over 35 years’ investment experience. He co-founded and ran Guinness Flight Global Asset Management until its acquisition by Investec in 1998. Following this, he led Investec’s Global Energy Fund before launching Guinness Asset Management in 2003.
Currently, the company has over £3.5 billion in assets under management (as at April 2021).
In total, Guinness Asset Management manages 11 equity funds, as well as two EIS funds and an IHT fund. They are overseen by a venture team of 15. Established in 2010, the team is led by Shane Gallwey, a chartered financial analyst. Mr Gallwey is assisted by five fund managers as well as a portfolio manager, Bridget Hallahane, who supports founder development.
While there is no requirement for management to invest in the EIS, the team has committed £2 million since the fund’s inception.
Watch our latest video interview with fund manager Shane Gallwey:
Guinness has always been a generalist investor, however, it had to adapt its strategy several times due to EIS rule changes. Originally, the fund invested solely in renewable assets. When these were no longer permitted for new EIS investments in 2016, the fund pivoted towards asset-backed investments. Most recently, the fund moved to a pure growth capital strategy in early 2018. Since then it has completed 13 growth capital tranches. The service has four tranche closes per tax year and targets full deployment within the same tax year – not guaranteed.
Under the current strategy, the EIS investment team looks for companies requiring scale-up capital with proven technology or services. Companies should be generating revenue as a minimum requirement, preferably £1 million or above. Guinness targets young businesses with good growth potential and seeks to manage risk by selecting businesses with strong balance sheets and cash flows.
Most investment opportunities will be sourced through the Guinness
network of advisors alongside accountancy firms and AIM brokers. On average,
the investment team expects to review close to 600 deals a year of which 2-3%
will receive investment.
Due to the number of opportunities the team reviews, Guinness employs a quick filtering process, to ensure companies it believes to be the best receive attention. The investment team pitches new deals daily and will only progress the strongest candidates into the next stage of assessment. A company will receive funding if the investment committee is confident it meets the fund’s brief and sufficient due diligence measures have taken place.
If possible, Guinness aims to add deal structuring and syndication.
The fund targets a return of £1.25 per £1 invested after 4-5 years. Please note neither returns not timeframes are guaranteed.
Guinness will consider potential exit routes and timeframes before committing to an investment. Since 2016, it has completed 10 exits (seven renewable and three growth capital) via trade sales but would also consider a management sale or IPO if either were appropriate. Exit options and timeframes are not guaranteed.
Since 2010, Guinness has raised over £200 million into EIS, £57 million into renewables, £27 million into AIM and £150 million into its generalist investments. Since switching to a growth capital strategy, the fund has invested over £100 million across 36 companies.
Guinness will target an investment portfolio of at least 10 investee companies (the average over the previous three tax years has been 11), split over a range of sectors. The targeted hold period is four to five years, not guaranteed.
Source: Guinness Asset Management, as at 22 May 2021.
Below are portfolio company examples from previous iterations of the fund. They are outlined to give a flavour of the types of companies you might expect but are unlikely to be part of a new investor’s portfolio.
Satchel (recent investment)
Satchel is the trading name of Teachercentric Ltd, an educational technology company producing software exclusively for the education market. Satchel’s main product is the UK’s leading homework management software “Show My Homework” used in 30% of UK secondary schools with over a million monthly active users.
With most pupils having to study from home for a large part of this year, Satchel has found itself a core part of a solution for schools. Satchel provides software products to schools to help teachers and pupils interact and manage homework, schoolwork, and feedback.
To date, the Guinness EIS fund has invested £3 million into the business, across eight separate fund tranches.
Popsa is a photobook creator with a twist. Unlike the tradition model, which relies on consumers manually sorting and arranging prints, Popsa uses bespoke algorithms and machine learning to automatically select relevant photos, creating finished products in just a few taps.
Since launching in 2016, the company has grown rapidly. The business now operates in over 50 countries and has achieved, on average, four times growth year-on-year. In 2020, Deloitte named Popsa as the UK’s fastest-growing software company and it placed third overall in the UK Fast 50.
Guinness EIS has invested £2.86 million into the company overall, alongside co-investors such as Silicon Valley accelerator 500 Startups, Octopus Investments, and Pembroke VCT. The latest funding tranche will be used to accelerate growth in the US and Germany and to enter the Australian and New Zealand markets.
Pasta Evangelists - recent exit
Pasta Evangelists, which counts Great British Bake Off’s Prue Leith as a founding shareholder, delivers high-quality fresh pasta, sauces and garnishes direct to customers’ homes nationwide. Ingredients are sourced seasonally and sustainably from a network of small farmers and growers across Italy. The company is expanding its retail channel with concessions at Harrods and M&S. Its products are also available on Deliveroo, Ocado and Amazon.
The business has seen a surge in demand and following changing consumer habits brought on by the Covid-19 outbreak. Revenues have now exceeded £1 million per month, up tenfold on last year: past performance is not a guide to the future.
Guinness Asset Management initially invested in September 2018 and then made a follow-on investment in February 2020, as part of a larger £3.5 million round with Pembroke VCT. Overall, Guinness EIS invested £3 million into the company. In January 2021, Barilla – the world’s largest pasta producer – acquired a majority stake in Pasta Evangelists. This generated a realised return of 3.5x (based on the original investment in 2018) for the Guinness EIS fund. Past performance is not a guide to future returns.
MyHomeGroup (an example of previous failure)
As with any early stage investment, not all will work out as planned. One such example is MyHomeGroup.
MyHomeGroup was an online estate agent that sought to offer customers the full benefits of a traditional high street estate agent but without the associated costs.
Unfortunately, like others in this sector, expected growth in the number of housing transactions in late 2019 and early 2020 did not materialise, and with lockdown earlier in 2020 the Company ceased trading altogether. MyHomeGroup went into administration on 17 April 2020, and there with be no residual value to shareholders.
Since switching to its growth capital investment strategy. Guinness has experienced three exits: Jones Food, Pasta Evangelists, and Cera Care. These have returned £19.2 million to investors and generated a 1.54x realised return, before tax reliefs. Please note past performance is not a guide to the future.
The chart below details the performance of the EIS fund since it first began making growth capital investments in 2018.
The chart below shows the average performance of the total subscribed into the funds each tax year, based on valuations as at 22 May 2021, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.
Source: Guinness Asset Management, as at 22 May 2021. Figures are net of all fees. Past performance is no guide to future performance. These figures do not include any realised returns which would be available through loss relief. In the above examples, initial tax relief of up to 30% could also apply. Remember tax rules can change and tax benefits depend on circumstances.
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 / SEIS 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, or even be prepared for all companies to fail.
Future funding rounds may dilute existing investments.
Exit could take considerably longer than three years.
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||3%|
|Wealth Club initial saving||0.5%|
|Net initial charge through Wealth Club||2.5%||Annual management charge||—|
|Performance fee||20%||Investee company charges|
|Initial charge||2.2%||Annual management charge||2.2%|
More detail on the charges
Timing of the offer
The fund anticipates taking up to 12 months to fully deploy investor capital following the closing dates. However, it may take longer.
The next tranche close is expected to be 17 December 2021.
The Guinness EIS fund aims to invest in scale-up opportunities in companies that have demonstrated an ability to generate revenues, have strong financials and sound business models.
The fund has a modest target return in line with its strategy: it aims not to pursue higher-risk opportunities and seeks a more prudent approach. However, as with all EIS investments capital is at risk.
The investment team is well resourced, and the fund has raised and invested a sizeable amount in the three years since it first began making growth capital investments. Furthermore, investments have been made into a number of later-stage businesses in competitive funding rounds. Guinness Asset Management has shown an ability to attract deal flow and deploy investors capital: note past performance is not a guide to the future.
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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.
- Target return
- Funds raised / sought
- Minimum investment
- 17 Dec 2021