Downing ONE VCT

Early bird saving of 1.0% on the initial charge

Downing is an experienced investment house, with over £1 billion of funds under management. It advises four VCTs, with cumulative assets of £160 million (Mar 2020).

Downing ONE is its longest-established and largest VCT, with net assets of £91.1 million (July 2020). Around 67% of the portfolio is in yield-focused, asset-backed unquoted companies and AIM-quoted companies which Downing considers have the potential to produce steady recurring income. The remaining 33% of the portfolio is in growth-focused investments made by the Downing Ventures team. Over time, the portfolio will shift towards growth-focused investments.

Under the current offer, the VCT seeks to raise up to £15 million, with a £25 million over-allotment facility.

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.

Read important documents and apply


  • Large and diversified portfolio of 93 investments, mostly asset-backed or quoted mature companies (67%) and growth investments (33%)
  • Invests both in unquoted and quoted companies (typically on AIM)
  • Experienced VCT manager
  • Target dividend of 4% – variable and not guaranteed
  • Annual rebate of 0.10% for three years
  • Invest in 2020/21 and 2021/22 tax years
  • Minimum investment £5,000 – you can apply online

The manager

The VCT is managed by Downing LLP, whose origins date back to 1986. Downing is an experienced investment house, with over £1 billion of funds under management. It has four VCTs, with cumulative assets of £160 million (Mar 2020).

Because of its hybrid nature, the VCT is jointly managed by the Unquoted Investment team, headed up by Kostas Manolis (also a Partner in Downing Ventures), and the Public Equity team, headed up by Judith MacKenzie. Chris Allner, who has 35 years of venture capital and private equity experience, most recently as head of private equity at Octopus Investments, chairs the investment committee as well as being a Partner in Downing Ventures.

Downing Ventures is a division of Downing LLP that invests in early and growth-stage technology businesses. The Ventures team has recently been strengthened with the appointment of Warren Rogers, who will serve as Partner and Head of Ventures. Warren is a significant hire for the group and brings deep technology venture capital experience. His previous roles included founding his own venture capital business, and serving as a Ventures Partner at Airbus. Warren’s appointment will seek to improve the diversity and quality of the deal flow being considered by the Ventures team. 

Investment strategy

The VCT in its current form is the product of a series of mergers. The most recent was in November 2013, when Downing Distribution VCT 1, which dates back to 1997, merged with five other VCTs (which had themselves previously merged with other VCTs) and changed its name to Downing ONE VCT.

At the point of the merger, the portfolio included investments made by Downing, as well as by previous managers of the VCTs Downing took over, including Rathbones, Framlington, and Legg Mason.

Historically, the portfolio was split between yield-focused unquoted investments (typically asset-backed companies, such as pubs and care homes, and companies with predictable revenue streams, such as renewable energy plants) and listed investments (typically established, cash-generative businesses listed on AIM). 

Following the introduction of new stricter VCT rules, Downing has had to tweak its approach. 

Whilst its existing portfolio can still include its historic holdings, new investments need to be in growth opportunities. New investments are sourced and managed by Downing’s Ventures team, which has £150 million under management (31 March 2020). The VCT will often provide later-stage funding to companies previously backed by Downing Ventures.

As more funds are raised and new investments are made, the portfolio split is likely to shift more in favour of growth opportunities, which currently represent 33% of the overall portfolio. This is up from 19% in March 2019 and is the result of new investments being made into growth opportunities, realisations from the existing portfolio, and negative performance from the quoted and unquoted yield portfolio.

The long-term risk profile of the VCT may increase as earlier stage investments increase as a proportion of the portfolio. The manager aims to mitigate some of the risks by avoiding start‐ups and focusing instead on companies that are already generating revenues, even though they may still be pre-profit, or companies that are profitable but which need cash to support their growth potential. 

Exit track record

In the 12 months to March 2020, Downing ONE VCT realised 15 investments, of which four were quoted, generating proceeds of £11.0 million and a realised loss of £303k. 

In the previous 12 months to March 2019, it realised 13 investments, generating proceeds of £3.3 million and profits over holding value of £30k. 

Past performance is never a guide to the future, but even more so in this case. These were mostly disposals of old-style investments, which are quite different in nature to the new-style ones. 

The latter are still too recent to bear fruit. For new investments, Downing is targeting unquoted companies where it believes there are reasonable prospects of a trade sale or clear exit strategy over a five- to seven-year time horizon and the prospects of a reasonable level of capital growth. Exit options and timeframes are not guaranteed. 

Yamuna Renewables Ltd

As is to be expected, not all investments work out. One such example is Yamuna Renewables, a wood pellet manufacturer. 

The company required funding to develop a new production plant in Austria which could produce up to 50,000 tonnes of wood pellets a year. Its key consumers were expected to be domestic and industrial biomass boilers, of which there were over 200,000 in Austria alone. 

However, due to substantial operational issues the company has been heavily written down. The VCT invested £2.5 million in 2016; this was marked down to zero in September 2018.

Covid-19 impact

The VCT has suffered a period of disappointing performance in the first half of 2020, partly as a result of the adverse impact of the coronavirus pandemic on investee companies. In 2020, the trusts’ net asset value fell from 74.4p on 31 December 2019 to a low of 57.6p on 31 March 2020. The net asset value per share has since failed to recover materially: the net asset value as at 30 June 2020 was 59.1p. Past performance is not a guide to the future.

Covid-19 has negatively impacted the VCT’s three investment strategies. 

  • Quoted portfolio: The quoted equity portfolio was already under pressure following a series of stock-specific issues and weak investor sentiment as a result of Brexit. The Covid-19 crisis has further weakened investor sentiment. 
  • Unquoted yield-focused portfolio: Assets in this portfolio include pubs and care homes. Downing has factored in the cost of closure, holding and restart and reduced earnings in to the valuations of these assets.
  • Ventures: Some businesses have started to show signs they may not achieve their business plan. The pandemic has, in some cases, accelerated this so the Board has made a number of write-downs.

Current portfolio overview 

As at July 2020, the VCT had net assets of £91.1 million and an investment portfolio valued at £69.5 million. The investment portfolio is split across three strategies:

  1. Unquoted yield-focused, typically asset-backed businesses (3%)
  2. AIM-quoted established, cash generative businesses (29%)
  3. Ventures: unquoted growth opportunities (33%) 

The portfolio is in transition. The unquoted yield investments have fallen from 48% of the investment portfolio to 38%. The quoted portfolio has fallen from 33% of the portfolio to 29%, and Ventures investments have increased to 33% of the portfolio. 

In addition, the portfolio invests in Downing Strategic Micro-Cap Investment Trust plc, which is a non-qualifying investment. This is currently one of the top ten holdings.

Examples of portfolio companies

Tracsis – Downing ONE VCTTracsis – largest quoted holding

Tracsis was spun out from the University of Leeds's School of Computing in 2004, following the development of crew scheduling software for rail services by Dr Raymond Kwan. Tracsis’ scheduling and rostering software (which helps railways run more efficiently) and condition monitoring hardware (which identifies possible issues with rail infrastructure before a costly failure) are now used by virtually all of the UK train operating companies. 

Tracsis was admitted on AIM in November 2007 at 40p per share. As at 31 August 2020, Tracsis was trading at 635p per share. Downing ONE’s holding is currently valued at £4.4 million (July 2020). 

Downing Care – Downing ONE VCTDowning Care Homes Holdings Limited – second-largest unquoted investment

The company operates four residential care homes providing specialist services for adults with learning and physical disabilities. They are located in Hampshire and Surrey and are managed by an experienced team with many years of experience in the sector. The homes were either developed from scratch or acquired from other operators. 

Downing ONE’s holding is currently valued at £4.1 million vs. investment cost of £3.9 million (July 2020). The VCT invested in a combination of debt and equity. 

Parsable – Downing ONE VCTParsable Inc – recent unquoted investment

Parsable is an example of a recent investment made within the VCT’s Ventures portfolio. The opportunity was initially brought to the team by Warren Rogers, Downing’s new Head of Ventures,. 

Parsable is a San Francisco-based startup that has developed a platform and applications to help bring high-tech solutions to deskless industrial workers who have been working mostly with paper-based processes. Parsable’s platform and applications enable those workers to collaborate in real-time with tasks, jobs, and procedures enhanced with messaging, voice, video, and image sharing. For instance, with a digitised and connected workforce, workers can raise issues as they occur and instantly involve the right parties and reduce the cycle time to resolve the issue. This should lead to increased productivity, safety and compliance. 

Downing Ventures participated in a $60 million Series D investment round amongst a host of world-renowned venture capital investors. The Downing ONE VCT invested £1.53 million.

Performance and dividends 

The VCT aims to pay dividends equivalent to at least 4% of its net asset value, paid twice a year, in February and August. Please note, dividends are variable and not guaranteed and past performance is not a guide to the future. 

Because of its exposure to AIM, and the style of investments made by the quoted equity team, which seeks to back unloved businesses which have fallen out of favour with investors, the portfolio has suffered from stock market volatility in the last 12 months (to March 2020). In addition, some of the unquoted portfolio companies have faced significant challenges. As a result, the VCT reported a large unrealised loss of £20.8 million in the twelve-month period to March 2020. This has had a substantial impact on the value of the trust.

Source: Morningstar. Past performance is no guide to the future. Dividends are variable and not guaranteed. The bar chart shows net asset value and cumulative dividends per share for the period 31 Dec 2014 – 30 Dec 2020.

Source: Downing. Dividends paid in each calendar year since the VCT merger in November 2013. Dividends are variable and not guaranteed and past performance is not a guide to the future.

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.

AIM shares can be very volatile and could suffer extreme fluctuations in value if the market falls sharply. The difference between the buying and selling price of AIM-listed companies is often wider than for those listed on the main market. 

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.

Full initial charge 4.5%
Early bird discount 1%
Wealth Club initial saving 2.25%
Existing shareholder discount 0.5%
Net initial charge through Wealth Club (new investors) 1.25%
Net initial charge through Wealth Club (existing shareholders) 0.75%
Annual management charge 2%
Annual administration charge See documents
Performance fee Up to 20%
Annual rebate from Wealth Club (for three years) 0.10%

More detail on the charges


  • 11 December 2020 for initial early-bird saving: Applications that are received and accepted by 3pm on 11 December 2020 will benefit from an early bird discount. This is 1.0% for new investors and 1.5% for existing investors
  • 26 February 2021 for reduced early-bird saving: Applications received between 12 December 2020 and 26 February 2021 (3pm) benefit from a reduced initial saving of 0.5% (new investors) and 1% (existing investors)
  • Invest by 1 April 2021 (3pm) for allotment in the 2020/21 tax year.
  • Invest by 30 April 2020 (3pm) for allotment in the 2021/22 tax year.

Dividend Reinvestment Scheme (DRIS)

The Company has adopted a Dividend Reinvestment Scheme under which shareholders are given the opportunity to reinvest future dividend payments by way of subscription for new shares. Subject to a shareholder’s personal circumstances, shares subscribed for under the Dividend Reinvestment Scheme should benefit from VCT tax relief. 

Share buy-back policy

As of March 2020 the board has suspended buybacks until further notice. 

Normally, the VCT intends to buy back shares at up to a 5% discount to the most recently announced net asset value. Buybacks are subject to the company having sufficient funds available and are at the discretion of the board. 

Annual rebate when you invest through Wealth Club

The VCT includes 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 0.10% of the Net Asset Value of the Offer Shares issued to you when you invest. Terms and conditions apply.

Our view

The VCT can be split between its legacy unquoted yield and AIM-quoted portfolio, and its growth capital focused Ventures portfolio. Around 67% of the portfolio is in yield-focused, asset-backed unquoted companies and AIM-quoted companies with the potential to produce steady recurring income. The vast majority of these are no longer allowed for new investment, although investors get exposure to the existing portfolio. The remaining 33% of the portfolio is in growth-focused investments made by the Downing Ventures team. Over time, the portfolio will shift towards growth-focused investments. 

Both parts of the portfolio have been impacted by Covid-19. The last twelve months have been challenging for the VCT, and investors have had to endure a poor period of performance. A bright spot may be the recent appointment of Warren Rogers, who brings additional experience, perspective, and some interesting investment opportunities, although only time will tell. 

Currently Downing ONE appears to be in the doldrums: its quoted investment portfolio is out of favour with the market and its asset-backed investments, which include a number of pub companies and care home providers, are facing an uncertain future. For longer-term experienced investors happy with the risks, this could be an opportunity to acquire out of favour assets cheaply, whilst benefitting from tax relief – note tax rules can change and benefits depend on circumstances. 

Read important documents and apply

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
4% of NAV
Initial charge
Initial saving via Wealth Club
3.25% (3.75% for existing shareholders)
Net initial charge
1.25% (0.75% existing shareholders)
Annual rebate
Funds raised / sought
£15.0 million sought
11 Dec 2020 (3pm) for early bird
Last updated: 14 September 2020

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