ProVen Legacy

ProVen Legacy is an inheritance tax portfolio run by some of the team behind the ProVen VCTs. 

Investors in this service buy shares in an unquoted company, ProVen Legacy plc, which makes secured loans to SMEs. Each loan will be backed by assets used in the borrower’s business, or the business will have predictable revenue streams. Provided the shares are held for at least two years and at the time of death, the value of the shares should benefit from 100% relief from Inheritance Tax, thanks to Business Property Relief. This is currently a small portfolio and so early investors will have limited diversification.

Highlights

  • Experienced team
  • Choice of growth or income shares
  • Targeted minimum total return of 3% p.a. net of fees (not guaranteed)
  • Minimum investment – £10,000
  • No fee will be paid to the Lending Adviser until the portfolio has delivered a return of at least 3% each year 

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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The manager

ProVen Legacy’s “lending adviser” is Beringea LLP, a US and UK venture capital and private equity manager known predominantly in the UK for two VCTs: ProVen and ProVen Growth & Income (together the “ProVen VCTs”). Beringea manages assets of approximately £600 million, with £250 million managed by the London office. 

The ProVen Legacy team is led by Mark Taylor. Mark is a pioneer of venture and growth finance in Europe having been a founding partner of EVP (now Kreos Capital) in 1998. He went on to found and manage Noble Venture Finance and was instrumental in creating Clydesdale Growth Finance. Since joining Beringea he has been responsible for lending within the ProVen VCTs. He has 30 years’ lending experience and spent the last 17 years focusing on venture and growth finance. He has been directly responsible for providing more than £178 million in debt finance since 1998. 

Mark works closely with two of Beringea’s Investment Directors: Hilary Weatherstone, who previously worked at Dresdner Kleinwort Benson, Barclays, and Ernst & Young; and Chris Bone, who co-founded Clydesdale Growth Finance. 

Together they source and advise on the loans made by ProVen Legacy. 

Watch an exclusive video with Mark Taylor of Beringea:

Recorded November 2018

Target return and strategy

Investors have the choice of growth or income shares. The performance target for both, not guaranteed, is 3% per annum after all expenses and operating expenses. When investing in growth shares the return is rolled up, whereas with the income shares it is paid out as a dividend.

ProVen Legacy has to be a trading business in order to qualify for Business Property Relief. Its trade is lending money primarily to asset-rich small and medium-sized enterprises (SMEs) and occasionally larger companies. 

There are two main sources for the deals. The first is ProVen's VCT portfolio. The second is the team's personal networks and Beringea’s contacts. 

Two types of lending are undertaken: secured lending and leasing asset finance.

ProVen Legacy has completed six loan facilities, four of which are still active (as of 31 March 2019).

ProVen Legacy will also lend to leasing businesses, for instance in the technology or office equipment sectors. Leasing asset finance is a lower-margin business than secured lending, but it adds a more attractive credit risk.

Companies should have turnover of between £1 million and £50 million per annum, be able to provide evidence of demand for their products or services and have a strong management team with a proven track record of achievement.

The manager keeps a cash buffer and concentrates on shorter-term loans to start. This lending strategy will help mitigate the liquidity risk inherent in the portfolio as many of the loans are capital repayment loans with monthly or quarterly repayments. 

Subject to the Board’s discretion and the availability of sufficient cash reserves, ProVen Legacy plc will redeem shares at a discount of 1% to the Net Asset Value per share as at 30 June or 31 December (as applicable). The Net Asset Value is calculated monthly.

Performance

As the offer only launched in 2016, the track record is limited, although two loans have now been repaid.

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.

IHT portfolios 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. Eligibility for BPR is assessed at the date of death and will depend on the companies in the portfolio remaining qualifying. Broadly speaking, you will need to have held a BPR qualifying stock for at least two years and still hold it on death to qualify.

The portfolio is small, meaning there is an initial risk in lack of diversification. The fees and charges are also proportionally greater for early investors in the portfolio although once the portfolio scales up the costs should be spread out, although there are no guarantees. 

Treasury review

The Chancellor has asked the Office for Tax Simplification to review a range of aspects of IHT, including BPR. A report has been published in July 2019. It is as yet unknown when and if any of the recommendations will lead to a change in rules. Currently, investments qualifying for Business Property Relief should be free from IHT after two years. Please remember, tax rules can and do change and benefits depend on circumstances.

Fees and charges

A summary of the charges is shown below. Please see the provider's documents for more details on the total fees and charges. If you would like a full breakdown of charges, or a personal illustration, please let us know.

Investor charges
Full initial charge 5.5%
Wealth Club initial saving 2%
Net initial charge through Wealth Club 3.5%
Annual management charge
Administration charge
Exit fee
Performance fee
Investee company charges
Initial charge
Annual lending advisory charge 1.5%
Administration charge 1.2%
Monitoring fee
Performance fee
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.

See example of the total charges over 5 years

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

Sector
Lending
Portfolio size
£2.8 million
Initial charge
5.5%
Saving via Wealth Club
2.0%
Net initial charge
3.5%
AMC
1.5%
Last updated: 21 June 2019

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