Seneca EIS Portfolio Fund

The Seneca EIS Portfolio Fund invests in both private and AIM-quoted growth businesses. It targets businesses the manager believes to be fundamentally sound, well managed and with good growth potential.

Since launching its first EIS service in 2012, the Seneca EIS investment team has invested £67.8 million into 58 investee companies across both its EIS and AIM EIS funds. It has since realised £35.6 million and has a remaining portfolio balance of £50.9 million - past performance is not a guide to the future.

Seneca will seek to invest in a blend of more established and earlier stage companies. It requires investee companies to have reached a certain level in their lifecycle and maturity and rules out very early-stage businesses. It is likely investors will receive a spread of unlisted and AIM-quoted businesses, although there is no explicit target allocation. 

The EIS fund will deploy investors capital into four to six investee companies. 

Important: The information on this website is for experienced investors. It is not a 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: you could lose all the money you invest.

Read important documents and then apply

Highlights

  • Targeting 4-6 investments per investor portfolio
  • Already established businesses 
  • Strong history of deal flow and deployment in growth capital deals
  • Exposure to EIS qualifying AIM-quoted businesses, not guaranteed 
  • Deferred annual charges until investors receive back their net investment amount
  • 1.6 to 1.8x target return excluding any tax reliefs – not guaranteed
  • Target exit within 4-6 years – not guaranteed
  • Minimum initial investment £25,000, subsequent investments of £5,000 - you can apply online

The manager

Seneca Partners was founded in 2010 to invest in small and medium-sized enterprises (SMEs) and help them grow. Founders Ian Currie, Tim Murphy and Richard Manley are SME specialists by background and believed many SMEs in the North of England were unable to access the capital they needed to grow. 

Today, Seneca Partners offers equity, debt and corporate finance and debt advisory services and manages approximately £200 million of assets. That includes £25 million of assets held by Seneca Bridging, and £75 million in Seneca Property Investments.

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.

Watch a video interview with Matt Currie of Seneca Partners:

 

Investment strategy

The Seneca team is sector agnostic, although companies within the technology solutions, ecommerce and life sciences sectors are likely to feature strongly. Seneca judges 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.

Seneca will seek to invest in a blend of more established and earlier stage companies. It requires investee companies to have reached a certain level in their lifecycle and maturity, and rules out very early-stage businesses. As with all EIS-qualifying investee companies, these are high risk. 

Unlike many EIS offers, Seneca invests in companies that are AIM-quoted at the point of investment. These tend to be more substantial businesses, arguably with more sophisticated management teams that are using capital markets to fund growth and development. Seneca sees AIM-quoted investments as potentially more liquid. This means it may be easier to achieve an exit after the minimum three-year EIS holding period, although visible daily pricing means they will be more volatile during the holding period. Seneca aims to use its strong relationships with national brokerage 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.

Target return

The fund has a target return of £1.60–£1.80 per £1 invested, before any tax reliefs, not guaranteed.

Exit strategy

Seneca targets an exit from each investment within 4-6 years – not guaranteed. The AIM-quoted companies’ shares are most likely to be exited through share sales on the market, although acquisitions are also possible. Exit strategies for the unquoted companies include trade sales, buyouts or restructuring. Seneca could benefit from the support of its own Corporate Finance team when exiting private businesses. 

Seneca will seek to exit at what it believes to be the optimum time, maximising returns to investors whenever possible, although returns and timeframes are not guaranteed.

Portfolio

The Seneca EIS Portfolio Fund will aim to deploy investors capital into a portfolio of at least four, and up to six, EIS-qualifying companies. The manager expects each portfolio to contain both unquoted and AIM-quoted companies, although this is dependent on deal flow. 

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.

SolasCure EISSolasCure (unquoted)

SolasCure was spun out of German biotech group BRAIN Biotech in 2017, and is led by Dr Sam Bakri who previously co-founded nicotine inhaler business Kind Consumer.

SolasCure is developing a new treatment for chronic wounds. The treatment draws inspiration from the maggots that have been used to clean infections for centuries, building on BRAIN Biotech’s experience in applying enzymes found in nature for industrial purposes. 

By isolating and cloning enzymes maggots use to feed on wound debris the company hopes to be able to accelerate wound healing and make treatment easier. The company’s first treatment is now in Phase I/II clinical trials.

Seneca first invested in the business in January 2021 as part of a £15 million fundraising round valuing the business at £37.4 million. Other investors include Abcam founder Jonathan Milner, Bionova Capital,the Development Bank of Wales, Wealth Club private investors as well as BRAIN Biotech, which remains SolaCure’s largest shareholder.

Wejo – Seneca EISWejo (unquoted)

Every day Wejo collects and analyses data from over 60 million journeys by 11.9 million vehicles.

The company’s data can be used to reduce congestion and pollution, while forecasting traffic and incident hotspots. Users include insurance companies, local authorities, and breakdown services, while manufacturing clients include General Motors, Hyundai, and Daimler AG. 

Seneca Partners first invested £1.3 million in 2016 via its EIS fund and provided a further £2.5 million across rounds in 2017 and 2018. Wejo has since received significant funding from other backers including Hella, DIP Capital, and the British Government. In 2019, General Motors invested €91 million into the business for a 35% stake, valuing the company at €244 million. 

In May 2021, Wejo announced plans to list publicly in the US via a reverse merger with Virtuosso Acquisition Corporation, a Special Purpose Acquisition Company (SPAC). The transaction implied an enterprise value of $1.1 billion and completed in November 2021. Past performance is not a guide to the future. 

SkinBioTherapeutics – Seneca Growth Capital VCTSkinBioTherapeutics Plc (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. 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, and subsequently provided an additional £1.25 million in 2019 and 2020. The position is showing significant gains, the manager has sold £4.7 million of shares and retains a position valued at £4.6 million (January 2022). Past performance is not a guide to the future.

The Hook Group (example of previous failure)

As is to be expected, not all investments work out. The Hook Group is one such example from the Seneca portfolio.

The Hook Group was a social media marketing agency and youth entertainment channel with over 14 million followers. Seneca first invested in the business in 2018 to support the development of longer form content and expanding into e-commerce. The fund provided further funding in early 2020.

Unfortunately the company ran into cash flow problems in early 2020, which were compounded by the pandemic. This saw a number of customers cut their advertising and marketing spend, and as a result administrators were appointed in April of that year.

Performance

Since its inception, the EIS portfolio service (now the Seneca EIS Portfolio Fund) has invested over £66.4 million into 56 investee companies. It has achieved 26 exits: 11 companies were realised at a profit, 7 were realised at a loss and 8 were written off. Overall, the exits generated exit proceeds of £35.6 million. The service has a remaining portfolio balance of £49.5 million. 

A key driver of the returns has been the exposure to AIM-quoted companies. The Seneca EIS fund has invested £28.3 million into 26 AIM-quoted companies and generated realised returns of £26.2 million, with a remaining portfolio balance of £14.2 million. Please note, past performance is not a guide to the future.

The chart below shows the average performance of the total subscribed into the fund each tax year, based on valuations as at 31 January 2022, 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: Seneca Partners, as at 31 January 2022. Performance figures are supplied by Seneca Partners and are net of all fees, based on Seneca Partner’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. 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 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.

There is no ready market for unlisted EIS shares: they are illiquid and hard to sell and value. There will need to be an “exit” for you to receive a realised return on your investment. Exits are likely to take considerably longer than the three-year minimum EIS holding period; equally, an exit within three years could impact tax relief.

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.

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.

Investor charges
Full initial charge 5%
Wealth Club initial saving
Net initial charge through Wealth Club 5%
Annual management charge 2%
Administration charge £175
Performance fee 20%
Investee company charges
Initial charge 0-4%
Annual charges 0-2%
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

Subscriptions to the fund will be held in cash by the custodian and build a sum for the fund to invest. The fund will hold periodic “soft closes” throughout the year, at which point it will begin deploying investors capital. Seneca anticipates taking between six to nine months to fully deploy capital, although this process may take up to 12 months or longer in certain circumstances. As is typical with EIS investments, it may not be possible to have all funds deployed before a deadline such as the end of the tax year. 

There are no deadlines with this EIS offer. 

Our view

Seneca Partners’ investment strategy is sector agnostic, although it is expected to have a bias towards technology, ecommerce and life science focused businesses. The team favours more established, yet still potentially fast-growing EIS-qualifying businesses, and will look to avoid investee companies it believes to be very early stage. This may appeal to investors who prefer a later-stage (though still high-risk) investment approach. 

In addition, unlike many other EIS funds, Seneca seeks to invest a proportion of investors capital into AIM-quoted companies. The market liquidity in AIM may provide the service with additional exit opportunities, although potentially increased volatility too. The AIM quoted exposure has historically been a key driver of realised returns for investors. Please note, past performance is no guide to the future.

The charging structure may appeal to investors. Seneca withholds its annual management charge until investors receive their net subscription back in full, which has the potential to enhance tax reliefs and creates an additional alignment of interest.

Seneca has a wide and established presence in the North, which could offer a geographically diverse exposure to complement a wider EIS portfolio.

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.

The details

Type
Fund
Sector
Various
Target return
1.6x
Funds raised / sought
-
Minimum investment
£25,000
Deadline
Discretionary
Last updated: 9 March 2022

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