Seneca AIM EIS Fund

The Seneca AIM EIS Fund was launched in September 2021 by experienced EIS manager Seneca Partners. 

The fund focuses exclusively on AIM-quoted businesses, targeting companies the manager believes to be fundamentally sound, well managed and with good growth potential. Seneca seeks to invest where it believes it can achieve an exit within 4-5 years (not guaranteed), taking advantages of the AIM market’s relative liquidity, compared to unquoted investments.

Although the fund has a relatively short history, the EIS investment team has been making AIM-quoted investments since 2012, when it launched its EIS Portfolio Service. Across both its EIS funds Seneca has invested £33.3 million into 38 AIM-quoted companies. These have been a key driver of overall performance across all of Seneca’s EIS investments, generating realised returns of £30.8 million with a remaining portfolio balance of £10.3 million. Past performance is not a guide to the future.

Since launch, the AIM EIS fund has invested £5.2 million in 17 AIM companies.

• 1.5x target return, before tax relief, after 4-5 years – not guaranteed 
• Targeting 5-10 investments per investor portfolio, deploying over 12 months – not guaranteed 
• Minimum investment is £15,000 through Wealth Club – you can apply online

The manager

Seneca Partners was founded in 2010 to invest in SMEs and help them grow. The three founders, Ian Currie, Tim Murphy and Richard Manley, are SME investment specialists who believed many smaller companies in the North of England were unable to access the capital they needed to grow. 

Today, Seneca Partners manages over £100 million in tax-efficient investments, with separate debt finance and property investment divisions. The EIS fund is managed Matt Currie, a Chartered Accountant with experience at Deloitte and RBS, overseen by an investment committee consisting of Seneca’s three founding partners. Matt is supported by an investment manager and two investment executives. 

Strong connections with UK brokers and a history of investing in IPOs and secondary fundraisings mean Seneca has access to qualifying AIM deals. This should help Seneca deploy investors’ funds in a timely manner – not guaranteed. Co-founder Ian Currie is key to this approach, having previous experience of raising capital for many AIM-quoted businesses.

Seneca Partners is the Fund Manager. Cash is held in a client money account controlled by the Fund’s Custodian, Woodside Corporate Services Ltd, whilst shares are held by the Fund’s Nominee, WCS Nominees Ltd. 

Investment strategy

The investment team seeks to make EIS-qualifying investments into AIM-quoted companies. 

The team believes AIM-quoted companies tend to be more substantial businesses, arguably with more sophisticated management teams, than private companies. In addition, AIM may offer more liquidity, potentially helping the team achieve an exit after 4-5 years.

The team seeks to invest in different sectors. Seneca evaluates each business on the strength of its fundamentals, with a focus on valuation and the ability of the management to deliver the growth plan.

The quality of the fund’s deal flow and subsequent selection of investments will be wholly dependent on the quality of EIS-qualifying deals coming to the AIM market, as well as Seneca’s ability to gain an allocation. 

Seneca believes EIS investors may receive preferential access to IPOs and placings as they must hold their shares for at least three years to retain tax reliefs. That may mean they are often looked on favourably by book runners when deciding upon investor allocations.

The fund has a target return of 1.5x, before any tax reliefs. Returns and timelines are not guaranteed.

Portfolio

The Seneca AIM EIS Fund aims to deploy investor capital into a portfolio of 5-10 AIM-quoted EIS-qualifying companies. Since its launch in September 2021, the fund has invested in 17 companies (November 2023). 

Some of these are outlined below to give a flavour of the types of investments you might expect. However, they are unlikely to be part of a new investor’s portfolio.

Itaconix

Itaconix is a chemicals business that develops innovative biopolymers from itaconic acid. These new chemicals can be used to replace ingredients in everyday products like detergents and personal care. The company’s technology relies on plant-based inputs, which it believes can enhance product sustainability and safety while not compromising on performance or cost.

The company has already seen success in cleaning products – it reported sales of $3.7 million in the first half of FY 2023, up from $2.7 million a year earlier, driven by growth in sales of a chemical with applications including dishwasher detergents and industrial cleaning.

Management is targeting further sales growth through expanding market share in North America and Europe and plans to introduce new products in late 2024 or 2025. In a December 2023 trading update, Itaconix revised its expected FY2024 and FY2025 revenues upwards with no changes to earnings expectations. 

The Seneca AIM EIS Fund invested in February 2023 as part of a £10.5 million round aiming to fund working capital and support revenue growth.

Oxford BioDynamics – recent investment

Oxford BioDynamics was spun out of the University of Oxford in 2007 and joined AIM in 2016. The company has used ground-breaking 3D genomics technology to deliver a range of blood tests capable of diagnosing life-changing disease and assessing how patients may react to treatment.

To date the company has three commercially available tests: EpiSwitch® PSE, a prostate cancer test with 94% accuracy, EpiSwitch® CiRT a test for cancer patients to assess likely reactions to common treatments, and EpiSwitch® CST, a test which assesses a patient’s risk of severe illness after contracting Covid-19.

EpiSwitch® PSE has been recently issued with a reimbursement code in the US – allowing tests to be easily billed to insurers – whilst in the UK CiRT will be available through Bupa.

The Seneca AIM EIS Fund invested £273,000 in August 2023 as part of a £5.6 million placement. The fundraise aimed to invest in sales and marketing activity related to the EpiSwitch® CiRT test and to complete validation and launch of the company’s prostate screening product.

SkinBioTherapeutics – example of previous exit

SkinBioTherapeutics is a life science company focused on skin health.

The company’s core proprietary technology, SkinBiotix®, is based on over a decade of research by Dr Catherine O’Neill (CSO) and Professor Andrew McBain at the University of Manchester. 

The technology uses extracts of probiotic bacteria to protect the skin from infection, increase the rate of healing, and improve the ‘integrity’ of the skin barrier to prevent the passage of toxins. SkinBioTherapeutics is looking to target three specific areas: cosmetics, infection control, and eczema (a combined annual global market of over $100 billion). 

In 2019 the company signed an agreement with Croda Plc, a world leader in active skincare ingredients, to begin commercialisation within the cosmetic industry. 

The Seneca EIS fund first invested in the company when it floated on AIM in 2017, a position it has subsequently sold for 3.9x cost. Seneca subsequently invested a further £2.1 million, including £370,000 through the AIM EIS Fund in 2023. Further sales by the Seneca EIS fund realised additional exit proceeds of £300,000 and Seneca’s remaining combined position is now valued at £2.3 million (November 2023). Past performance is not a guide to the future. 

Nektan – example of previous failure

As is to be expected, not all investments work out. Nektan is one such AIM-quoted example from the Seneca EIS Portfolio Fund. 

Nektan was an international gaming technology and services provider, specialising in mobile casino. It licensed its proprietary technology to leading operators, including BetVictor. 

Seneca invested £685,000 in December 2015, as part of a £1.36 million placing. Proceeds from the placing were to fund further expansion in the US tribal and commercial casino market through the Group's US joint venture, Respin, as well as supporting the Company's working capital requirements. 

In April 2020, Nektan announced it was appointing an administrator after failing to raise the funds required to secure the future of the company. Its shares were suspended from trading on AIM. Seneca lost its full investment. 

Performance 

Since launch, the Seneca AIM EIS fund has invested £5.2m into 17 companies, the current investment value is £3.5 million. As a relatively young fund it has yet to realise any of those investments.

Across both the EIS and AIM EIS portfolios, Seneca has invested £33.3 million in 38 AIM companies. This has resulted in £30.8 million of realisations, with a remaining portfolio balance of £10.3 million. Please note, past performance is not a guide to the future. 

The chart below shows the performance of Seneca’s AIM-quoted investment (made through the Seneca EIS Portfolio Service from 2013/14 to 2021 and the AIM EIS Fund thereafter to 2022/23). It gives the average performance of the total subscribed in each full tax year, based on the latest valuations provided by the manager, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average. Performance is shown net of charges (based on current fee structure, different charges may have applied in the past). 

It's important to note that the number of AIM EIS investments made through the Seneca EIS Portfolio ranges widely from one in some years to 11 in one year. By contrast, the AIM EIS fund targets a more consistent portfolio size of 5-10 companies – not guaranteed.

Performance of EIS-qualifying investments per £100* (21 companies)

Performance of Seneca AIM EIS Fund after launch per £100 invested (17 companies)

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 and should only form part of a balanced portfolio. As must be expected with early-stage investments, some or even all of the companies in the portfolio could fail: the fewer the companies included in the portfolio, the higher the risk of loss if things don’t go to plan. You should not invest money you cannot afford to lose.

As the price of an AIM business is driven by the market, the manager doesn’t have the same scope to negotiate entry price compared to unquoted shares. AIM shares could suffer extreme volatility if the market falls sharply. The difference between the buying and selling price of AIM-quoted companies is often wider than those on the main market.

To claim tax relief, you will need EIS3 certificates, normally issued once shares have been allotted. This can take several months: please check the deployment timescales carefully. Tax reliefs depend on the portfolio companies maintaining their EIS-qualifying status. Remember, tax rules can change and benefits depend on circumstances.

Please note, shares in AIM, whilst comparatively more liquid than those in unquoted companies, can still be hard to sell when compared with main market shares. Exits could take longer than three years; equally, there may be circumstances where Seneca sells holdings within three years and thus tax relief may be lost.

Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.

Charges

A summary of the main charges 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.

Our view

Seneca has been making EIS investments since 2012 when it launched the Seneca EIS Portfolio Service. Since then, around 40% of the EIS money raised has been invested in AIM-quoted companies.

The fund will seek to use the AIM market’s relative liquidity, compared with private companies, to deliver realised returns to investors over a 4-5 year period – not guaranteed. Consequently, the fund may appeal to investors looking to re-invest exit proceeds into new EIS-qualifying investments with corresponding income tax relief.

Seneca’s investment strategy is sector agnostic. Investors should also note that since the service is wholly focused on AIM, the quality of the investments made will depend in part on the pipeline of new EIS-qualifying fundraises coming to AIM. 

Instead of receiving an annual management fee, the investment team is incentivised to achieve exits via its realisation and performance fees.

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.