Anglo Scientific EIS Fund
The Anglo Scientific EIS Fund, established eight years ago, is a joint partnership between Innvotec and Anglo Scientific Limited, investing in the next generation of technology-focussed companies.
- Evergreen EIS
fund investing in emerging, technology-focused businesses
- Focus on
disruptive, scientific innovations in areas of global importance, such as
healthcare and defence
- Maximum of eight and a minimum of four portfolio
- Investors will typically know which companies
they will hold
- Exits targeted
from year 4 onwards (not guaranteed)
- Minimum investment
Anglo Scientific Limited commercialises scientific research. It is neither a venture capital fund nor a fund manager (that is where the partnership with Innvotec comes in), although members of the team invest meaningful amounts in the companies they form. It gets involved at the earliest stages of company development, typically co-founding a business together with lead scientists, academics and institutions, before building up the firm to pursue global market entry and growth. Anglo Scientific has historically founded one new company each year.
Innvotec is the investment manager. It has been investing in early stage technology companies for over 30 years, and has thus weathered a number of market cycles. Innvotec has raised over £100m and invested in more than 150 companies to date.
Companies sought by the Anglo Scientific EIS fund will possess technology capable of delivering products that have the potential to be globally disruptive. Example industry sectors include: medical technology, microelectronics, security and communications.
The companies will be at one of the following stages:
- At the latter stages of core technology development
- Have developed and certified products and starting market entry
- Have been recently formed with technology undergoing on-going development.
Mostly, they are at the latter stages of their core technology development and starting to adjust their focus towards deployment of the technology and commercial exploitation. This means they will have met and overcome many of the initial technical challenges and be starting to deploy and commercialise their technology. These early stages of commercial exploitation offer potential for significant capital appreciation, allowing them the chance to deliver “J-curve” growth in revenue, profit and value – although there are no guarantees and capital is at risk.
As well as having world-class technology, the firm must have defensible intellectual property and potential to address a global market. It should have the potential to generate annual revenues of over £75 million within ten years.
Anglo Scientific team members are required to invest themselves and take an ongoing and active involvement in the management and development of the business. Indeed, Anglo Scientific makes its money through the capital appreciation of its founder ordinary shares in the portfolio companies. It thus aligns its interests with investors and co-founders.
Whilst not a university spin out fund, several of the portfolio companies have a university or research sector pedigree. For instance, Phagenesis, the most recent exit, came out of Manchester University.
Investors in the Anglo Scientific EIS Fund largely know at the outset which companies will receive their money and how it will be utilised, so this is not a “blind pool”.
PerformanceTo date, the Anglo Scientific EIS Fund has made 74 separate investments in 12 of the companies formed by Anglo Scientific Limited. It has had three failures, and one good exit. In 2016, the first company, Phagenesis, specialising in the treatment of dysphagia (an inability to swallow typically resulting from a stroke) made a profitable exit to Nestlé Health Science.
Investors must be aware they are investing in early stage businesses which take time to mature. Should this fail then the investment will likely retain little or no value. By definition this is a high-risk investment which could result in a total loss, as well as having the potential to deliver high returns. In a portfolio of five to ten companies, one might do very well (although there are no guarantees), several could fail and the others might just tick along.
The usual risks with unquoted companies exist with this EIS offer. For instance, EIS investments are illiquid and capital is at risk. Investors should only invest money they cannot afford to lose. Tax benefits will depend on individual circumstances and tax rules can change.
Fees & deadlines
There are no direct initial charges paid by investors.
There is an Annual Management Fee of 1.5% per annum plus VAT. This is deferred and accrued until there is sufficient money in the fund to meet this liability. Given the stage of development of the underlying Portfolio Companies this is likely to come from exit proceeds. If the accrued fees cannot be paid, the fund manager will write off any remaining monies owing to it from the fund.
There is a performance fee of 30%, paid on returns over 140% of the initial investment, including tax relief.
There may be fees charged to the underlying portfolio companies which will impact investor returns indirectly. Please see the Information Memorandum for more details on fees.
Investors wishing to have funds deployed in 2017/18 for carry-back purposes will need to apply by 3 April 2018 at the latest (29 March if paying by cheque).
This fund sits in high-risk but high-reward territory. We like way the charging structure of the fund aligns with investors’ interest, as does the requirement for Anglo Scientific’s team to invest in the portfolio companies personally. The team is very experienced: the partnership is a good match with Innvotec providing the investment angle and Anglo Scientific the hands-on company development. The track record to date seems good, although remember past performance is not a guide to the future.
Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based 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. 21.12.2017.
- Target return
- Funds raised / sought
- Minimum investment