Seneca AIM EIS Fund
The Seneca AIM EIS Fund is a new fund from experienced EIS manager Seneca Partners.
As the name suggests, the fund will focus exclusively on AIM-quoted growth-orientated businesses. It targets companies the manager believes to be fundamentally sound, well managed and with good growth potential. Using the AIM market’s relative liquidity, compared to unquoted investments, Seneca seeks to invest in opportunities where it believes it can achieve an exit within 3-4 years (not guaranteed).
Despite this being Seneca’s first fund with a sole focus on AIM, the EIS investment team has been making AIM-quoted investments since 2012, when it launched its EIS Portfolio Service.
Since then, Seneca has invested £64.9 million across 53 investee companies. Nearly half of the capital (£27.2 million) was invested in 23 AIM-quoted companies. These have been a key driver of the fund’s overall performance, generating realised returns of £24.3 million (73% of the total fund’s realised returns) with a remaining portfolio balance of £18.5 million (38% of the total fund’s unrealised returns). Past performance is not a guide to the future.
The Seneca AIM EIS fund is now being launched on the back of this experience.
Due to the strong pipeline of opportunities it sees coming to the AIM market, Seneca believes it will be able to fully deploy investor’s capital within the 2021/22 tax year for subscriptions received by 15 September 2021.
The fund is available without advice only through Wealth Club, with an exclusive allocation of £500k until 15 September.
Read important documents and apply
- Targeting 5-10 investments per investor portfolio
- Wholly focussed on AIM-quoted EIS-qualifying companies
- Track record of making EIS-qualifying AIM investments and returning capital to investors – past performance is not a guide to the future
- 1.5x target return before tax relief – not guaranteed
- Target exit within 3-4 years – not guaranteed
- Minimum investment £20,000 – you can apply online
Seneca Partners was launched in 2010 by founding partners Ian Currie, Tim Murphy and Richard Manley. The purpose was to invest in small and medium-sized enterprises (SMEs) and help them grow. All three founders are SME investment specialists by background. They believed many SMEs in the North of England were unable to access the capital they needed to grow.
Today, Seneca Partners offers equity, debt, corporate finance and debt advisory services, managing approximately £101 million of tax-efficient investments. Seneca Partners is also a founding member of a similarly branded network of companies which includes Seneca Bridging, with assets under management of over £25 million, and Seneca Property Investments, which has assets under management of over £75 million.
The Seneca network of companies currently employs over 60 people and has strong regional connections, with four offices across the North of England.
From the hundreds of opportunities Seneca Partners sees each year, it will seek to invest in around 20-25 overall. Typically, there are at least 10 businesses at various stages of due diligence awaiting investment at any given point. This should help Seneca deploy investors’ funds in a timely manner – not guaranteed.
Seneca Partners is the Fund Manager. It doesn't handle or hold investors’ money or shares. 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.
Watch a video interview with Matt Currie of Seneca Partners
NB: This interview discusses Seneca’s EIS Portfolio Fund rather than the AIM EIS fund.
The investment team will seek to make EIS-qualifying investments into AIM-quoted companies. AIM-quoted companies are favoured by the team as they tend to be more substantial businesses, arguably with more sophisticated management teams that are using capital markets to fund growth and development. In addition, AIM-quoted companies may be more liquid, which could increase the likelihood of the team achieving its central objective, an exit after 3-4 years.
The team will use its strong relationships with the national broker firms to take part in institutional investments. Co-founder Ian Currie is key to this approach, having previous experience of raising capital for many AIM-quoted businesses.
The team is sector agnostic, although companies within the technology solutions, e-commerce and life sciences sectors are likely to feature strongly. Seneca evaluates each business on the strength of its investment fundamentals with a focus on valuation and the ability of investee company management to deliver on the growth plan.
The fund is reliant on suitable EIS-qualifying companies raising capital on AIM. The quality of the fund’s deal flow and subsequent selection of investments will be wholly dependent on the quality of deals coming to the AIM market, as well as Seneca’s ability to gain an allocation to those deals.
Seneca believes EIS investors may receive preferential access to IPOs and placings. EIS investors are long-term investors as they must hold their shares for a minimum of three years to retain tax reliefs. So, they may be looked upon favourably by book runners when deciding upon investor allocations.
The fund has a target return of £1.50 per £1 invested, over 3-4 years, before any tax reliefs. Returns and timelines are not guaranteed.
The central objective of the fund is to achieve exits – and return cash to investors – after 3-4 years – not guaranteed. This could allow investors to re-invest exit proceeds back into new EIS-qualifying investments with corresponding income tax relief – remember tax rules can change and benefits depend on circumstances.
The Seneca AIM EIS Fund will aim to deploy investors capital into a portfolio of 5-10 AIM-quoted EIS-qualifying companies.
As this is a new fund, there are no examples of previous portfolio companies. Below we give examples of AIM-quoted companies in which Seneca previously invested through the Seneca EIS Portfolio Service. 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.
Polarean Imaging Plc
Polarean Imaging is a healthcare technology company that has developed a drug-device combination to improve the efficacy of lung MRI scans.
Patients inhale polarised Xenon, a harmless inert gas. The hyperpolarised gas improves the image signal by a factor of 100,000, allowing clinicians to identify lung structure and ventilation patterns more effectively. This improved visibility could be vital for early disease detection as well as progression monitoring.
The business is UK based with manufacturing operations in North Carolina with key research facilities at Duke University and the University of Virginia.
It is estimated that there are over 35,000 MRI scanners globally. No other technology can currently provide a safe and non-invasive visualisation of the lungs including small airways and gas exchange regions. Respiratory diseases are an area of unmet clinical need as current methods of assessing lungs provide either limited information or are harmful with the use of radiation.
With its phase III trials complete, the final step is FDA approval, expected in October 2021. This clinical pathway, once approved, allows for commercial sales into clinics, hospitals and care units to achieve significant value.
Seneca first invested £650,000 in April 2020 at 18p per share as part of a £2.1 million private placing to support the company’s ongoing clinical trials. It provided further support in March 2021 as part of a £25 million placing at 60p per share.
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. Additionally, the company is working on a clinical trial (in collaboration with Winclove Probiotics B.V.) to develop a probiotic blend with the aim of treating sensitive skin conditions, such as psoriasis.
Seneca first invested in the company when it floated on AIM in 2017. It has since provided an additional £1.5 million in follow-on funding at 16p per share. As at 01 June 2021, the share price was 69p per share. Past performance is not a guide to the future.
Gear4music (Holdings) Plc – example of previous exit
Gear4Music is the UK's largest online retailer of musical instruments. Seneca provided a cornerstone growth capital investment to support the Gear4music IPO in June 2015, investing £1.25 million as part of a £9 million placing. The funds raised at IPO were used to support the further development of its bespoke e-commerce platform, invest in additional marketing initiatives, pay down debt and extend its range of products.
During the next three years, the company experienced significant growth in the UK and Europe, with annual revenues increasing from £24 million to over £80 million, as well as growing its market capitalisation to more than £150 million – past performance is not a guide to the future.
Seneca was able to fully exit the investment in 2018, shortly after reaching the EIS three-year minimum holding period, generating sale proceeds of £6.5 million, a 5.2x realised return.
Nektan Plc – example of previous failure
As is to be expected, not all investments work out.
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, Nektar Plc 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.
This is a new AIM EIS fund so there is no historic performance track record.
However, since launching its first EIS service in 2012, the Seneca EIS investment team has invested £64.9 million, of which £27.2 million was invested into 23 AIM-quoted companies, generating realised returns of £24.3 million, with a remaining portfolio balance of £18.5 million. Please note, past performance is not a guide to the future.
Below we show the performance of AIM-quoted investments made through the Seneca EIS Portfolio Service.
The chart shows the average performance of the total the fund invested in AIM EIS-qualifying companies each tax year, based on valuations as at 30 July 2021, expressed on a £100 invested basis. 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 12 in one year. By contrast, the AIM EIS fund targets a more consistent portfolio size of 5-10 companies – not guaranteed.
Source: Seneca, as at 30 July 2021. Performance figures are supplied by Seneca Partners and are gross of all fees. Costs will reduce returns: for the Seneca EIS portfolio after 5 years the Reduction in Yield (RIY), i.e. the impact of total costs on returns when you cash in your investment, could be 0.96% to 5.43%. Past performance is not a guide to the future. In the above figures, 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 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.
There is a limited choice in the universe of AIM stocks that meet EIS qualification rules. 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.
Exits could take longer than the EIS three-year minimum holding period. Equally, an early exit could affect tax relief.
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.
|Full initial charge||5%|
|Wealth Club initial saving||—|
|Net initial charge through Wealth Club||5%||Annual management charge||—|
|Administration charge||£35 p.a.|
|Performance fee||20% + 4% Realisation fee||Investee company charges|
More detail on the charges
Timing of the offer
The next deadline for this offer is 30 September 2021.
Seneca anticipates taking up to 12 months to fully deploy investors capital. However, due to the strong pipeline of opportunities coming to the AIM market, Seneca believes it will be able to fully deploy investor’s capital within the 2021/22 tax year – not guaranteed. The deployment of capital will be dependent on Seneca receiving its required allocation when participating in an IPO or placing.
Whilst this is a new fund, Seneca has been making EIS investments since 2012 when it launched the Seneca EIS Portfolio Service. Since then, nearly half of the capital raised through the fund was invested in AIM-quoted EIS-qualifying companies, which have been a key driver of historic realised returns. Given this track record, Seneca has now launched a standalone AIM EIS service.
The newly launched fund will seek to use the AIM market’s relative liquidity, compared with private companies, and seeks to deliver realised returns to investors over a 3-4 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, although it is expected to have a bias towards technology, eCommerce and life sciences, sectors that are well represented on the AIM market. Investors should note that since the service is wholly focused on AIM, the quality of the investments made will be dependent 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.
Read important documents and apply
See five-year performance of shares mentioned above
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
- £500,000 sought
- Minimum investment
- 30 Sep 2021 for 2021/22 allotment