Albion VCTs

The six Albion VCTs are overseen by Albion Capital, a well resourced investment manager led by experienced managing partner Will Fraser-Allen. Albion has been managing the VCTs and investing in technology and scale-up companies for over 20 years.

Each of the six VCTs targets two dividends a year, each in a different month. This means investors in all six VCTs could potentially receive tax-free dividends throughout the year – not guaranteed. 

Together, the six VCTs have net assets of c.£620 million (June 2022) and give investors exposure to a portfolio of around 70 companies, a combination of predominantly growth capital investments and a smaller legacy portfolio of income-generating, asset-based and renewable energy investments, as well as cash. 

Over the five years to December 2022, the Albion VCTs have produced NAV total returns (including dividends reinvested) ranging from 31.9% to 55.7%. Past performance is not a guide to the future.

• Seeking to raise up to £50 million with a £30 million overallotment facility 
• Target dividend of 5% of NAV per annum – variable and not guaranteed
• Minimum aggregate investment £6,000 (£1,000 per VCT)

The manager

Started as the venture capital arm of Close Brothers in 1996, Albion Capital Group LLP (“Albion”) has been managing VCTs for over 20 years. The original Albion Venture Capital Trust launched in 1996, followed by Albion Development VCT, Albion Technology & General VCT and Albion Enterprise VCT. Albion was later awarded the investment management contracts for two additional VCTs, Crown Place and Kings Arms Yard, in 2005 and 2011 respectively. 

Today, Albion Capital has assets under management of £945 million, of which around £620 million is held across the VCTs. 

The investment team consists of 23 investment professionals and is led by managing partner Will Fraser-Allen, who joined Albion in 2001 and is an experienced technology investor. The team is supported by a further 25 dedicated operational and support staff. 

Albion has continued to strengthen its team, with several internal promotions and hires at more junior levels, establishing itself as a healthcare and technology specialist. Albion’s investment team also includes a mixture of investment professionals and platform staff who support investees with operational issues including hiring, governance and corporate finance. 

Investment strategy

Historically, the Albion VCTs followed a broad investment strategy with a blend of growth and asset-based investments (such as schools and renewable energy assets). Following changes to VCT rules in 2015, the strategy has transitioned to focus purely on growth opportunities. 

The team has a bias towards healthcare technology – particularly the digitalisation of healthcare – financial technology, digital risk, and AI & Data stack sectors. 

At a company level, the investment team looks for B2B businesses with a unique offering, operating in fast-growing markets. Specifically, the VCTs target companies the manager believes have reached an inflection point and require additional funding to accelerate growth.

The VCTs will invest across a range of maturity stages, from seed to Series B funding rounds. Portfolio companies are broadly split into three stages, early stage, growth, and scale up, depending on turnover. It is expected most companies will have turnover greater than £1 million, with a small proportion of earlier-stage ventures. Albion believes diversification across sectors, size, and maturity of the businesses can help build ‘all-weather portfolios’. 

Current portfolio overview

The six Albion VCTs have net assets of c.£620 million (June 2022). The net assets of each range from £65.3 million (Albion Venture Capital Trust) to £117.4 million (Albion Enterprise VCT).

Asset breakdown (% of NAV) 

The combined portfolio includes around 70 unquoted companies, most of which have some degree of co-investment across the six VCTs. The sector breakdown of the combined portfolio is shown below; however, percentages will vary between the individual trusts. 

Combined portfolio sector breakdown (%)

The combined Albion VCT portfolio is concentrated within its top 10 holdings, which account for 38% of net assets. The top five holdings (Quantexa, Proveca, Egress Software, Oviva and Chonais River Hydro) account for 27% of net assets. Around 33% of net asset are currently held in cash or other liquid investments.

Examples of portfolio companies

Quantexa – largest holding

Big-data analytics firm Quantexa uses artificial intelligence to uncover hidden relationships and emerging risks, helping financial institutions spot and prevent fraud. Today, Quantexa’s technology is used in over 70 countries by blue-chip banks (including HSBC, Standard Chartered Bank, and Danske Bank), insurers and government organisations. 

Quantexa reported revenues of £5 million in its first full year to March 2018. It more than tripled this to £17.5 million in the year to March 2020. The business came 14th in The Sunday Times Sage Tech Track 100, which ranks the UK’s 100 fastest-growing private technology companies. 

This growth has attracted significant fundraising interest. To date, Quantexa has raised £182 million from high-profile investors, including Accenture, British Patient Capital, HSBC and Albion. 

Albion first participated in a £2.7 million funding round in 2017, just a year after the company was founded, and has since followed on several times. Quantexa is currently the largest holding within the combined portfolio. The latest $153 million funding round, in July 2021, values the £10 million invested across the Albion VCTs at £65.6 million, representing 11% of net assets (June 2022). Past performance is not a guide to the future. 

PerchPeek – recent investment 

The pandemic has changed the way we work. Employers offer greater flexibility, including hybrid and remote working options, while at the same time tapping into the global talent market to tackle the growing skills gap. As a result, the global employee relocation market is now worth an estimated $33.5 billion. 

The PerchPeek app combines technology and relocation experts to make employee relocation quicker, cheaper and easier for employers and employees. Its variable packages can cover anything from organising airport transfers on arrival to arranging utilities for employees’ new homes.

Since launching in January 2020 the company has helped more than 5,000 people relocate, including to the UK, Ireland, Germany, the Netherlands and the US. The number of employees relocated through the company’s app increased 250% in the second half of 2021 compared to the first.

Albion initially invested in the business in February 2022, the lead investor in an £8 million Series A round alongside Boston-based Stage 2 Capital. 

Exit track record

Over the three years to June 2022, the Albion VCTs have exited 19 companies, generating exit proceeds of £212.9 million. The most notable was the sale of Process Systems Enterprise Limited to Siemens AG in 2019, for proceeds of £21.5 million, resulting in a total return of approximately 10.4x cost. 

More recent exits include the sale of stakes in Credit Kudos (detailed below and generating proceeds of £15.5121. million and a 5.2x return), Phrasee (proceeds of £14.1 million and a 3.5x return) and Mymeds&Me (proceeds of £13.3 million and a 4.0x return).

Credit Kudos – recent exit

Credit Kudos is a Credit Reference Agency that uses financial data obtained via Open Banking APIs. 

The idea for the company came about after software engineer Freddy Kelly (co-founder) returned to the UK after working in Silicon Valley. On his return Freddy discovered his time away had severely impacted his credit history, leaving him with limited options. 

Rather than rely on assumptions, Credit Kudos allows lenders to analyse verified, up-to-date transaction data. With direct connections to the UK’s largest banks, users can safely and securely share their financial information with lenders, removing the need to upload bank statements and payslips. This not only provides a fairer credit rating for the user but also allows lenders to make quicker decisions and access a previously overlooked client base.

The business was acquired by a major US tech group in March 2022, just two years after Albion invested. The exit generated £14.4 million in proceeds for the VCTs, equivalent to a 4.8 x return on cost. Past performance is not a guide to the future. 

Mi-Pay Group – previous failure

As can be expected, there have also been failures. An example is Mi-Pay, which provides a fully outsourced secure payments platform for mobile network operators, specifically for prepaid mobile phones.

Albion originally invested in 2007. In 2014, the business was quoted on AIM after being acquired by AimShell Acquisitions Plc. After a prolonged period of underperformance as a public company, the business was sold in 2020 to Alphacomm BV, a Dutch online payments solution provider. The sale of the business generated a realised return of 0.03x. 

Performance and dividends

Over the 10 years to December 2022, the Albion VCTs have produced NAV total returns (including dividends reinvested) ranging from 68.6% to 130.1%, with returns over five years ranging from 31.9% to 55.7%. Past performance is not a guide to the future. Note, we show VCT returns over a five-year period as a minimum, where possible. Where a VCT has followed the same investment strategy for longer, we also show returns over 10 years.

The six VCTs aim to pay half-yearly dividends (each calculated as 2.5% of the most recently announced NAV) twice a year, each in a different month. So, an investment in all six VCTs could potentially generate a monthly income stream throughout the year – dividends are variable and not guaranteed. 

Over the five years to December 2022, the six Albion VCTs have paid total dividends per share of between 28.5% and 58.2% of the starting net asset value on 31 December 2017.

NAV and cumulative dividends per share over five years (p)

Dividend payments in the calendar year

Dividend Reinvestment Scheme (DRIS)

The VCTs operate a dividend investment scheme that allows shareholders to reinvest future cash dividend payments in new shares if desired. As these are new shares they should be eligible for tax relief (you will need to claim this on your tax return or directly with HMRC) and the shares will count towards the VCT annual subscription limit. 

Share buy-back policy

The boards intend to buy back shares at up to a 5% discount to the prevailing net asset value. This is not guaranteed – please see the offer documents for details. 

Discount history

VCT shares are traded on the London Stock Exchange. Similar to investment trusts, the share price can fluctuate and can be different from the VCT’s net asset value (NAV), i.e. the value of the VCT’s underlying investments. The difference between the share price of a VCT, and its net asset value per share, is called a discount.

Based on data from Morningstar, the average discount to NAV as at 30 June 2023 was -6.22%. Over the previous five years the average discount to NAV was -5.98%.

The discount history is based on the closing share price of the VCT at the end of each month, divided by the latest net asset value at the time. Past performance is not a guide to the future. Investors looking to sell their VCT shares may get a better price using the VCTs’ share buyback facilities, although this is not guaranteed.

Risks – important

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

VCTs 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. 

To retain the tax benefits, VCTs should be held for at least five years. If you sell VCT shares and reinvest in new shares of the same VCT (including any mergers) within six months, tax relief can be restricted. Tax rules can change and benefits depend on circumstances.

Charges and savings

A summary of the main charges and savings is shown below. The net initial charge shown includes the Wealth Club saving and any early bird discount. The investment may have additional charges and expenses: please see the provider documents including the Key Information Document for more details, offer price and share allotment calculation methodology.

Please note, capacity – for the offer or any early bird savings – can be reached early, and we may not be notified of this by the VCT in real time.

Annual rebate when you invest through Wealth Club

The Albion VCTs include an annual rebate for Wealth Club investors, payable for the first three years. 

This is a rebate of our renewal commission and should be equivalent to a percentage (shown in the table above) of your subscription. Terms and conditions apply.

Deadlines 

• Third allotment in 2022/23 tax year: 31 March 2023 (2pm)
  
• Final allotment in 2022/23 tax year: 5 April 2023 (2pm)
• First allotment in 2023/24 tax year: 14 April 2023 (2pm)
• Final allotment in 2023/24 tax year: 29 September 2023 (2pm)

Our view

By investing across the Albion VCTs, investors gain access to a portfolio of growth capital investments and a somewhat smaller legacy portfolio of income-generating, asset-based and renewable energy investments, as well as cash. Following the sale of several more mature assets, the combined VCT portfolio has a strong bias towards fintech, software & technology and healthcare sectors (53% of net assets), which in our view is an area of strength for the VCT. Past performance is not a guide to the future.

The team has deep technology and healthcare sector expertise. Several of the portfolio’s largest holdings have performed well, with the VCTs’ largest holding Quantexa ranking among Europe’s fastest growing businesses according to a recent Financial Times study, although there are no guarantees of future success. 

The trusts aim to pay twice-yearly dividends on different months of the year, so, if all six VCTs are held, investors could potentially benefit from tax-free dividends throughout the year – not guaranteed. 

In our view, the ability to access a growing portfolio of technology and healthcare businesses combined with the potential for a regular income stream, in part supported by Albion’s legacy asset-based investments, makes this a compelling offer for consideration: investors should form their own view.

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.