British Smaller Companies VCTs

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British Smaller Companies VCT (BSC) and British Smaller Companies VCT 2 (BSC2) are longstanding generalist VCTs managed by YFM Equity Partners.

The most recent share offer (December 2018) raised £35 million in aggregate for the two VCTs – our review of this offer is below. 


  • Two of the longest established and best-regarded VCTs
  • Combined net asset value of £148 million (30 Sep 2018)
  • Established and well diversified portfolio 
  • First major fundraise since the 2015/16 tax year
  • Experienced management team with over £220 million assets under management
  • Excellent track record to date – past performance is not a guide to the future and dividends are not guaranteed

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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.

The manager

The British Smaller Companies VCTs are amongst the ‘granddaddies’ of the VCT world. They have been around a long time (BSC since 1996 and BSC2 since 2001) and have built a loyal following amongst investors.

YFM Private Equity (“YFM”), the investment adviser, has been investing in young, fast-growing companies for over 35 years. It was one of the first asset managers to launch a VCT and is now one of the most recognised and best-regarded names in the industry. 

Established in Yorkshire, YFM is independently owned by the senior management and investment team. Today, it has 14 employees dedicated to investment and portfolio management with over 200 years’ experience between them. YFM has a strong regional presence with offices in Leeds, London, Manchester, Birmingham, and Sheffield.

The team is led by managing director, David Hall. Mr Hall, a chartered accountant, has run YFM for 15 years and has over 30 years of private equity, venture capital, and fund management experience.

Watch a video interview with David Hall, YFM's managing director:

Recorded 16 October 2018

Investment strategy

Historically, the two VCTs have had a different focus, resulting in different portfolios. 

BSC focused on a mix of management buyouts and growth capital deals. 

BSC2, known as the British Smaller Technology Companies VCT 2 until 2010, concentrated, as the former name suggests, on very early-stage technology companies. 

However, since 2010 the two VCTs have started investing together. New investments are typically allocated 60:40 (60% to BSC and 40% to BSC2). 

For the past seven to eight years both VCTs have targeted a blend of innovative businesses operating in established industries. The manager selectively chooses from over 400 investment opportunities each year generated by YFM’s regional office network and its strong ties with the local corporate finance community. 

Like many other long-established VCT managers, YFM has had to adjust its investment strategy to suit the new VCT rules. However, it hasn’t had to reinvent itself. 

Mr Hall credits this to YFM’s interest in companies which have a clear, scalable opportunity. This strategy has been consistent throughout the history of the two portfolios, but in the past delivered through a mix of buyouts and growth deals. The new rules haven’t caused a u-turn in strategy, but an adjustment in the way that strategy is executed, with a greater emphasis on younger companies. Both VCTs now focus completely on growth capital opportunities. Particularly they look for companies that could use the additional capital to expand outside the UK. 

Together, the VCTs have already made six investments under the new rules for a total of £20.3 million in the 18 months to 30 September 2018. This trend is set to continue with the portfolio becoming increasingly younger. Mr Hall expects this will produce increased demand for follow-on investment – a key reason for the current fundraise. 

Exit track record

The VCTs have a history of exits between them. Together, they have realised over 35 investments in unquoted companies over the last 15 years, generating a total return of 2.6x, although please note past performance is not a guide to the future.

BSC has benefitted from the most successful exits. 

An example is President Engineering Group, a Sheffield-based manufacturer of precision engineering products, which first received investment in 2010 and was sold to US-based Parker Hannifin in 2015, realising an 8.5x return for the VCT. BSC2 did not invest in President Engineering Group. 

The best return to date is from outdoor retail specialist, GO Outdoors. 

GO Outdoors - BSC VCT-min.jpgGO Outdoors – 37.2x exit (BSC)

From a £10 walking boot to a £900 specialised tent, GO Outdoors is a one-stop shop for outdoor gear. The company offers an ‘Aladdin’s cave’ of equipment with the simple goal of helping customers get the most of the outdoors. YFM originally invested £1.3 million in 1998 when there was a single store in Sheffield. By 2016, turnover had increased from £2 million to £200 million and GO Outdoors had become a leading retail business with over 58 stores and 2,000 employees. 

In November 2016, it was announced that YFM had fully exited the investment through a £130 million sale to JD Sports Fashion plc. BSC realised a 37.2x return over 18 years. BSC2 did not invest in GO Outdoors. 

However, not all investments are successful. While YFM has a good track record there will be – and there have been – failures. Past performance is not a guide to future returns. 


The VCTs both have a diverse portfolio. Currently, no single investment represents more than 8.4% of the net asset value of either VCT. 

Across the combined portfolio, 71% are legacy investments made before the VCT rule change in November 2015. Many of these old-style deals include a loan element, so loan repayments could provide the VCTs with a relatively stable source of income, which can help support dividend payments whilst the newer companies have a chance to grow. 

Any new investments will be in growth capital opportunities, so the split between old and newer-style investments will progressively shift to newer and higher-risk deals.

The VCTs typically invest across five sectors: IT, business services, manufacturing, healthcare, and retail. The existing portfolio breakdown is shown below. 

Source: YFM. As at 30 September 2018.

Example portfolio companies

BSC2 – ACC AviationACC Aviation (largest holding, management buyout deal)

ACC supports international clients in all aspects of aircraft leasing, aircraft charter, flight management, aircraft interior sales and refurbishment and airline support services. 

It started in 2002 as a modest shopfront operation and today is one of the fastest-growing and most successful aviation service providers in the world. It is based in Surrey but also has offices in Rome, Dubai and, since August 2018, Kuala Lumpur. 

YFM invested £365k in 2014 across both BSC and BSC2, backing the experienced management team to buyout the retiring founder and provide growth capital for local and international expansion. At the most recent valuation the holding is valued at £11.9 million. Note past performance is not a guide to the future and the actual returns, if and when BSC and BSC2 realise their investment, may be more or less than this. There are no guarantees. 

EIKON - BSC and BSC2 VCTsEIKON (recent investment, growth capital)

EIKON is a film post-production company. It offers services ranging from subtitling, visual effects, and campaign management from its state-of-the-art facilities in London and Burbank. 

Founded in 2014, EIKON has doubled revenues year on year and grown its staff from six to 100. Already an established name in the industry, EIKON has an extensive client list featuring studio giants such as Paramount, Universal, and Twentieth Century Fox. 

You may have seen some of its work too, with recent hits “A Quiet Place”, “Greatest Showman” and Oscar-winner “Shape of Water” in its portfolio. 

YFM invested £5 million in March 2018 to help EIKON expand into the US and build on relationships with digital giants Netflix and Amazon. EIKON’s new facility in Los Angeles is almost complete and a fourth facility in Asia is being considered. 

BSC2 – FriskaFriska (recent investment, growth capital)

Friska is a chain of healthy fast-food restaurant offering fresh food to eat in, take away or for office catering for breakfasts and lunches, winner of an Observer award for Best Ethical Restaurant. 

Founded in Bristol in 2009, Friska serves breakfast, lunch, and coffee around its idea of “Feel Good Food”: globally inspired, locally and responsibly sourced food. Its target market is young professionals, so its store locations tend to be in central business districts.

YFM Equity Partners invested £3 million in July 2017, to help Friska expand its retail estate. At the time of the investment, Friska had eight outlets in Bristol and an airside site at London’s Luton airport and expected to turn over £4.6 million. 

Following YFM's investment, Friska has expanded to Manchester with two new outlets – one at Manchester Science Park and the other in St Peters Square. 

Dividends and performance 

BSC VCT has paid an average annual dividend of 10.5p over the last five years to March 2018, equivalent to an effective annual yield of 14.6%. 

BSC VCT 2 has been less prolific, with an average dividend of 4p (6.8% yield) to June 2018. Please note, dividends are not guaranteed.

The difference is largely due to the historical difference in investment strategy and portfolio. Some of the companies that achieved significant realisations were held just in BSC, not BSC2. 

As the two VCTs have been sharing the same investments since 2010 and plan to continue to do so, Mr Hall expects future performance to converge. 

The VCTs have not set a specific target dividend. In future, as newer growth capital investments take over from old-style ones, dividends could be lumpier.

Source: YFM. Net Asset Value and cumulative dividends paid to 31 Mar (excluding 2018, BSC) and 31 Dec (excluding 2018, BSC2) each year. Past performance is not a guide to the future. Dividends are 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. 

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.

Fees and charges

A summary of the fees and charges for each VCT is shown below. The net initial charge shown includes the Wealth Club discount.

Full initial charge 4.5%
Wealth Club initial saving 2%
Net initial charge through Wealth Club 2.5%
Annual charge – BSC 1%*
Annual charge – BSC2 from 1%*
Annual rebate (for three years) 0.10%
Performance fee 20%

More detail on the charges

Dividend Re-investment Scheme (DRIS)

A dividend re-investment scheme is available if shareholders wish to reinvest dividend payments by way of subscription for new shares. 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 buybacks

Each of the VCTs has a current policy of buying back shares at a discount of no more than 5% to the latest published NAV, subject to available liquidity in the VCTs, applicable rules and regulations and market conditions.

Our view

A familiar name to most VCT investors, British Smaller Companies VCTs have earned their reputation, in our view. Their ethos of “transforming smaller businesses” has served them – and their shareholders – well in the past. They have a good history of exits and an experienced team who look eager to develop a new portfolio of growing businesses. However, please remember past performance is not a guide to the future and there are no guarantees.

While the new VCT rules may present some challenges, YFM seems well placed to tackle them. The current rate of investment into new qualifying opportunities could be an encouraging sign of things to come.

How to invest

The VCTs are currently not open to new subscriptions. However, register your interest here and you will receive free alerts when 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.

The details

Target dividend
Initial charge
Initial saving via Wealth Club
Net initial charge
Annual rebate
Funds raised / sought
£35.0 million / £35.0 million
No current offer
Last updated: 1 November 2018

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