Update (22 Jul 2020): Intention to fundraise announced
The Baronsmead VCTs have announced they intend to open a share offer in 2020/21. You can register your interest here.
We will update our review as soon as the new offer documents are available. You can read excerpts of our previous review below.
Register your interest now – no obligation
- Two large and longest established VCTs
- Robust track record
- Diversified portfolio of both AIM and unquoted companies
The history of these VCTs goes back to 1995, the year VCTs were first established.
For years they have been managed by Livingbridge, a leading UK independent private equity firm with a presence also in Australia and the US.
In November 2018 Livingbridge’s fund and investment management business, including the Baronsmead VCT business, was sold to Gresham House, a specialist AIM-listed alternative asset manager. Gresham House manages assets of over £2.1 billion across five investment strategies: strategic public equity, private assets, forestry, new energy, housing and infrastructure. The team responsible for the investment management of the two VCTs transferred from Livingbridge to Gresham House.
Baronsmead Venture Trust (“BVT”) is the result of the merger between Baronsmead VCT 2 (established in 1998) and Baronsmead VCT (established in 1995). Baronsmead Second Venture Trust (“BSVT”) is formed from the previous Baronsmead VCT 3 (2001), Baronsmead VCT 4 (2001) Baronsmead VCT 5 (established as Baronsmead AIM VCT in 2006).
Both are generalist VCTs and invest primarily in a diverse portfolio of UK growth businesses, either unquoted or AIM quoted, albeit with a stronger emphasis on the latter than other generalist VCTs. The AIM bias could make these VCTs more volatile than other generalist VCTs.
Until the rule changes in 2015 the VCTs’ investment strategy was predominantly to invest in management buyouts. As these are no longer allowed the investment strategy has had to change. Unlike other VCTs, Baronsmead has yet to recruit additional resources to help with the change in investment style, although it has plans to bolster the team this year.
In the short to medium term, returns for investors are likely to be dictated by the old investment strategy; medium to long term, by the new investment strategy. As with all VCTs the new investment strategy is likely to produce more volatile returns and dividends could become less predictable as the risk profile of the portfolio changes.
Founded in 1980, Key Travel is a travel management company providing airline tickets, hotels, rail tickets, visas and risk management services to clients including charities such as Oxfam and Save the Children and universities including Bristol, Cambridge and Liverpool.
In 2013 Livingbridge supported a management buyout with a total investment of £9 million. Five years later, in May 2018, Key Travel was acquired by private equity firm Elysian Capital for an undisclosed amount. Livingbridge reportedly achieved a return of 3.2x its original investment – note past performance is not a guide to the future.
Crew Clothing Co.
Founded in 1993, Crew Clothing Co. is a clothing brand offering distinctly British casual wear. The founder, a professional skier and windsurfer, started off with a small collection of rugby shirts and sailing-themed clothes he took to Cowes Week, on the Isle of Wight, and sold out of all his stock. This success prompted him to sacrifice his place in the British Ski Team so as to focus on developing Crew Clothing.
By 2006, the business had grown to 34 stores. The founder wanted to continue building the business but also realise some of his cash. Livingbridge bought 25% of the company in 2006 as part of a £7.7 million deal. Since then it has helped materially expand the business, which by 2017 achieved annual revenues nearing £60 million from its portfolio of over 80 stores and e-commerce channel. In December 2017 Crew Clothing was sold to US-based apparel manufacturer Exquisite Apparel for an undisclosed sum. This resulted in a 2.3x return for Livingbridge – note past performance is not a guide to the future.
In The Style
As can be expected, not all investments work out. One of the most recent examples is fast fashion retailer In The Style. Founded in 2013, it grew rapidly, mainly through clever use of social media and collaborations with a string of reality TV celebrities. In 2017 it reported sales of £15 million.
Livingbridge invested £5 million in May 2017. Less than 12 months later the company’s accounts showed an increase of £3.4 million in its retained losses.
The company was sold to Irish private equity firm Causeway Capital in December 2018 for £2.5m (€2.77m). The VCTs’ investment had been previously written off.
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.
Tax rules can change and benefits depend on circumstances.
VCTs can now only invest new money in growth capital deals. Management buyouts, replacement capital deals and investments in mature companies are no longer permitted. This results in considerably higher risks.
How to invest
The VCTs are not currently open to new subscriptions, but intend to launch an offer for subscription in 2020/21.
Register your interest now to receive alerts when new VCT offers open.
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.
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