Parkwalk Knowledge Intensive EIS Fund II

Offer closed

As at 24 March 2022, the Parkwalk Knowledge Intensive EIS Fund II reached capacity and stopped accepting applications.

The Parkwalk Opportunities EIS Fund, which follows the same investment strategy, is open for applications.

Alternatively, see other EIS offers that are currently open. 

To be notified when the Parkwalk Knowledge Intensive EIS Fund next opens, please register your interest below.

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The second Knowledge Intensive (KI) EIS Fund from Parkwalk Advisors (“Parkwalk”) launched in December 2021 and will close on 1 April 2022 (4pm, applications and cleared funds). 

The fund will be managed by the same team and follow the same investment strategy as its stablemate Parkwalk Opportunities EIS Fund

However, because of the ‘KI approved fund’ structure, it could offer tax-planning advantages: investors may be able to obtain relief earlier and have the option to carry back to the 2020/21 tax year (more details below). 

In addition, the fund will target a portfolio of at least 10 companies, as opposed to five for the Parkwalk Opportunities EIS fund.

The EIS KI Fund will focus on the exciting – but high risk – UK university spinout asset class.

Parkwalk, the manager, claims to be the UK’s most active investor in this area and has strong ties to the UK’s leading universities, managing funds in conjunction with the Technology Transfer departments of the University of Cambridge, the University of Oxford, Imperial College, and the University of Bristol. 

Parkwalk additionally benefits from being part of IP Group plc, a FTSE 250-listed asset manager focused on intellectual property commercialisation. To date, Parkwalk has £360+ million of assets under management. It has invested in 152 companies and achieved 42 full and partial exits, 19 of which were profitable with exit multiples ranging from 1.1x to 16x, although past performance is not a guide to the future.

Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value, so you could get back less than you invest.

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Highlights

  • KI Approved EIS fund: timing advantages for income tax and the opportunity to carry back to 2020/21 (tax rules can change and benefits depend on circumstances)
  • University spinout portfolio with high growth potential
  • Proven management team
  • Strong ties to the UK’s leading universities
  • Targets a minimum of ten portfolio companies spread across a range of maturities and technologies – not guaranteed
  • Co-investment opportunities with institutional investors, including parent company IP Group
  • Parkwalk has a strong track record of realised and unrealised returns, although past performance is not a guide to the future
  • EIS5 tax certificate issued once fund is 90% invested. Expected within 12-18 months, not guaranteed.
  • Target holding period of four to eight years
  • Minimum investment £25,000

The manager

Parkwalk Advisors is a specialist university spin-out investor with £360+ million assets under management. It was founded in 2009 and in 2017 was acquired by IP Group, a leading intellectual property commercialisation company with net assets of £1.4 billion (June 2021) and a market capitalisation of £1.2 billion (December 2021). IP Group also acquired Touchstone Innovations, which was set up to invest in promising technology companies spun out of Imperial College and University College London. 

The combined group gives it a strong hand when accessing deal flow and negotiating terms, as well as providing a possible exit route for investors. 

The investment committee consists of eight investment professionals, including founders Moray Wright and Alastair Kilgour. The team has experience across banking, fund management, start-ups, venture capital, and drug development.

Meet the manage: Watch a video interview with Cassie Doherty of Parkwalk:

 

Knowledge-intensive approved EIS funds: how do they work?

Knowledge-intensive (or KI) approved EIS funds received the final go-ahead from the Chancellor in March 2020.

A KI fund must invest 80% of its portfolio in “knowledge-intensive” companies. These are businesses that are carrying out research, development, or innovation at the time of investment.

Provided certain conditions are met, a KI approved EIS fund allows investors to set their income tax relief against liabilities in the same tax year the fund closes or to carry back to the previous year, whereas a conventional EIS fund will allow investors to claim tax relief based on the tax year in which each individual investment is made or carry back to the previous tax year.

Investors in KI funds can expect to receive a single EIS5 certificate (as opposed to individual EIS3 certificates for each investee company, as is the case with non-approved funds). Certificates can be issued once the fund has invested 90% of its capital, which it is required to do within 24 months of the close. 

Please note: tax rules can change and benefits depend on circumstances. To maintain KI approved status, the fund needs to comply with requirements set out by HMRC. Should the fund fail to do so, it will impact investor tax relief. 

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Investment strategy

Parkwalk’s niche is UK university spinouts. It invests in technology or intellectual property developed in a university that the university then tries to commercialise. Universities are starting to cotton on to how valuable this can be.

Notable UK university spinouts include:

Company University Activity
ARM Cambridge Acquired by SoftBank in 2016 for $32bn
Vocal IQ Cambridge Acquired by Apple in 2015
Oxford Nanopore Oxford Raised £524m at IPO in 2021 with a £3.4bn valuation
Improbable Cambridge Raised $50m in 2018 at a £1.5bn valuation
Darktrace Cambridge IPO in 2021 with a valuation of £1.7bn

Parkwalk has investments in 152 companies spun out of twenty universities. In addition to the Opportunities EIS fund, Parkwalk manages funds in conjunction with the technology transfer departments of the University of Cambridge, the University of Oxford, Imperial College London and the University of Bristol. Parkwalk typically co-invests alongside large investors, including (in alphabetical order) Amadeus, Baillie Gifford, Cambridge Innovation Capital, Touchstone (Imperial) Innovations plc, Invesco Perpetual, IP Group plc and Oxford Sciences Innovation plc.

Parkwalk generally invests when the technology has been proven, but products have yet to be sold, and well before commercialisation. However, the fund also has the freedom to invest in later-stage companies, perhaps before an AIM listing.

Parkwalk’s first KI EIS Fund, launched in January 2021, is on course to be fully invested by the end of the current tax year, having invested in £1 million to £3.5 million in 10 companies in a wide range of tech-enabled sectors from agrtech to digital health. 

Parkwalk has focused on larger and later-stage deals – this is reflected by the size of the investment rounds in which it participated: from £6 million to £40 million (average £22 million). Investee companies typically have deeply embedded IP and are given freedom to operate. Parkwalk usually seeks experienced, relevant management to commercialise the product. 

Investors’ subscriptions are expected to be invested over a period of 12 to 18 months from the date of the fund close, although this is not guaranteed. Investors will receive their EIS5 certificates once the fund is 90% invested, but for income tax purposes the tax relief will be available as if the investments were made at the point the fund closes (1 April 2022). This means income tax relief can be set against the current tax year or carried back to the previous.

Target return

The fund's target return is unspecified, but every investee company has to have the potential to return five times the original investment. Clearly, not all will do that. The performance fee is linked to a return of an investor’s original capital overall, not the performance of an individual investment.

Exit strategy

The fund has a target life of between four and eight years (not guaranteed). 

All the members of Parkwalk’s management team have backgrounds in capital markets or introducing companies to later-stage investors. As well as the more traditional exit options for EIS investment – such as an IPO or trade sale – Parkwalk’s relationship with its parent, IP Group, could provide additional exit opportunities and liquidity for investors, although this is not guaranteed.

Portfolio

The fund will aim to invest in a portfolio of at least ten early-stage EIS-qualifying technology companies. 

Below are portfolio company examples from previous iterations of the Parkwalk Opportunities EIS 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. 

Congenica – Parkwalk Opportunities EIS FundCongenica – a spinout from Wellcome Sanger Institute

Congenica was founded in 2014 by two researchers from the Wellcome Sanger Institute, a department of the University of Cambridge, and one of the foremost centres of genomics research and innovation in the world.

Congenica has developed a clinical genomics analytical platform called SapientiaTM, which enables the accurate, rapid and scalable clinical interpretation of complex genomic data. The platform can help clinicians and researchers diagnose rare diseases and develop prognoses and treatment options much faster. 

In 2018, Congenica was selected by Genomics England as the exclusive Clinical Decision Support Platform for research use for the UK NHS Genomic Medicine Service, the first national healthcare system in the world to offer whole genome sequencing as part of routine care. This contract could allow Genomics England to diagnose ‘rare diseases’ in days rather than the average seven years it currently takes in the west.

In November 2020 Parkwalk participated in a $50 million Series C investment round, co-led by Legal & General and Tencent, the Chinese tech giant, to fund the further development of the company’s clinical genomic analysis software and data platform.

Mind Foundry – Parkwalk Opportunities EIS FundMind Foundry – spinout from Oxford university

Mind Foundry is an artificial intelligence business spun out of the University of Oxford’s Machine learning Research Group. The business is developing ‘data science in a box’ to help organisations in the public and private sectors tackle real-world problems. 

Mind Foundry’s AI solutions are being used for a wide variety of purposes, from monitoring complex jet propulsion systems in the aerospace industry to working with governments to intelligently model and predict the changing requirements for Electric Vehicle charging infrastructure and helping insurers detect fraudulent claims. 

The company completed an €11.5 million funding round in October 2020 led by large Japanese insurer Aioi Nissay Dowa Insurance, following a successful project with its UK subsidiary. The group now plans to make the Mind Foundry platform a core part of its digital transformation strategy.

Parkwalk first invested in the business in February 2016 and has participated in multiple funding rounds. The most recent round, in October 2021, valued the business at £39.4m, a 36.8% uplift in valuation compared to the November 2020 round. Past performance is not a guide to the future.

Yasa – Parkwalk Opportunities EIS FundYASA – example of previous exit

YASA develops revolutionary compact, lightweight and powerful electric motors and controllers. The products enable vehicle hybridisation and electrification, especially where there is limited powertrain space. 

The company supplies custom and off-the-shelf e-motors and controllers to automotive customers from its Oxford headquarters. YASA is a Ferrari Strategic Technology Partner and has supplied a custom electric motor for Ferrari’s first hybrid vehicle, the SF90 Stradale. The same core motor is planned for the F171, to be launched in 2021. YASA is also entering the aviation market and has partnered with Rolls Royce to break the speed record for electric flight.

Parkwalk first invested in YASA through a £1.8 million Series A funding round in August 2012 at a £5.7 million pre-money valuation. Since then, Parkwalk has supported the business through further funding rounds, most recently in August 2019, at a pre-money valuation of £72.5 million. 

In July 2021 Parkwalk announced that YASA had been acquired by Mercedes-Benz. The sale delivered returns of between 2x to 6x, depending on the round, and returned £45 million to Parkwalk investors. Past performance is not a guide to the future.

Tangetix Limited (example of previous failure)

As can be expected, not all investments work out. One example is Tangentix. 

Tangentix had patented technology enabling faster and more cost-effective game downloads. The company was based on mathematical research from the University of Bradford. Tangentix raised substantial funding over various funding rounds (2013 to 2018) from a group of institutional investors including Parkwalk, the Rising Stars Growth Fund (part of Mercia) and Finance Yorkshire. The company struggled to gain commercial traction with its compression technology, despite apparent savings to suppliers of games through download cost reduction.

In late 2018 the company appointed Chris Maples as CEO, who was previously VP of Spotify Europe. He and the board instigated a new strategy of aiming to become an independent platform for video games (a ‘Netflix’ or ‘Spotify’ equivalent). Unfortunately, the cash runway within the company was not long enough to allow the new product to be launched, and the other investors were unable to continue financing the company. The company, therefore, entered voluntary liquidation resulting in a loss to investors.

Performance

The first Parkwalk Knowledge Intensive EIS Fund  only launched in January 2021, so does not yet have a track record. However, it shares the same investment team and investment strategy as Parkwalk Opportunities EIS. 

For investors who have been invested for more than five years, investing in tax years 2010/11 – 2015/16, on average, for every £100 invested into Parkwalk EIS Opportunities fund, investors would have received £114 in realised returns, not including initial tax relief, and would have a portfolio balance of £64 remaining.

The chart below shows the average performance of the total subscribed into the fund each tax year, based on valuations as at 8 December 2021, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.

Performance per £100 invested in each tax year

Source: Parkwalk, as at 08 December 2021. Performance figures are supplied by Parkwalk and are net of all fees, based on Parkwalk’s valuation methodology. Past performance is no guide to future performance. In the above figures, initial tax relief of up to 30% could also apply on sums invested after paying initial fees – 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 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. Exits could take considerably longer than three years.

The manager believes that if a company fails, the intellectual property it owns could still have some resale value, but there are no guarantees. 

To maintain KI approved status, the fund needs to comply with requirements set out by HMRC. Should the fund fail to do so, it will impact investor tax relief. 

Whilst income tax relief is linked to the closing date of the fund, capital gains tax deferral relief and inheritance tax relief are linked to the dates on which the fund invests in the underlying companies and not to the Closing Date.

Charges

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.

Investor charges
Full initial charge 5%
Wealth Club initial saving
Net initial charge through Wealth Club 5%
Annual management charge 1.5%
Administration charge 0.25%
Dealing charge 0.2%
Performance fee 20%
Investee company charges
Initial charge
Annual charge
All fees and charges are stated exclusive of VAT, which may be applicable in some cases. Any fees and charges payable by the investee companies or the underlying businesses do not directly come out of your investment. However, they will effectively reduce the returns generated by investee companies and therefore impact your investment.

More detail on the charges

Timing of the offer

The fund will close for applications and cleared funds on 1 April 2022 (4pm). Since this is an approved KI EIS Fund, investor subscriptions should qualify for income tax relief within the 2021/22 tax year. Capital gains tax deferral relief and inheritance tax relief are linked to the dates on which the fund invests in the underlying companies and not to the Closing Date. 

EIS5 certificates are expected to be issued once at least 90% of the capital has been deployed. Parkwalk aims to deploy funds raised within 12 to 18 months from the closing date of the fund.

Our view

Compared with the Parkwalk Opportunities EIS Fund, the EIS KI Fund provides investors with greater clarity on the timing of income tax relief, a single tax certificate, and greater diversification (it targets a minimum of 10 investee companies, twice as many as the Opportunities EIS fund). The first fund, raised in 2021, is on course to be fully invested.

Parkwalk invests in some of the most innovative technologies, from artificial intelligence for autonomous vehicles, to the world’s most efficient solar cells and electric motors being used by Ferrari. The funds have a clear investment strategy in a defined area: university spinouts. The Parkwalk investment team has plenty of experience in this field, and Parkwalk’s standing in the industry could allow access to opportunities other managers would be hard-pressed to access. Previous Parkwalk funds have included some interesting high risk, early investments in cutting-edge technology businesses, and investors have historically been well rewarded, although past performance is not a guide to the future.

Parkwalk is set apart by its links to both the UK’s leading universities and large institutional investors, such as parent company IP Group Plc. These could provide investee companies with access to the pools of liquidity needed to commercialise their intellectual property, and potentially provide EIS investors with an additional route to exit although this is not guaranteed. Please note, due to the focus on intellectual property, these investments are very early stage, and this is a high-risk EIS fund offering.

In our view, as with the Parkwalk Opportunities EIS fund, this is a high-quality offer that is enhanced by its HMRC Approved status. The fund provides exposure to an exciting and hard to reach part of the market. The prospect of investing in a portfolio of ten early-stage, cutting-edge technology businesses might appeal to those investors looking to complement a wider investment portfolio, where gaining exposure to university spinouts might be more challenging.

Read important documents and then apply

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.

The details

Type
Fund
Sector
University spinouts
Target return
-
Funds raised / sought
£25.0 million / £25.0 million
Minimum investment
£25,000
Deadline
CLOSED
Last updated: 14 December 2021

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