Maven Income and Growth VCTs

Maven Capital Partners is a highly regarded fund manager, known for its strong regional presence. It manages four VCTs with combined net assets of £216 million (as at October 2020). All VCTs now follow the same investment strategy: they primarily target unquoted businesses with robust growth prospects across a variety of sectors. They can also invest in any AIM-quoted opportunities the manager considers attractive. 

Historically, Maven has built its reputation as a provider of equity and loan finance to fund management buyouts of small and medium-sized businesses. Following changes to the VCT rules in 2015, it has had to adjust its investment strategy to seek new growth capital investments. Maven appears to have adapted well: its investment team has become an active backer of early-stage growth businesses, making 43 new investments across its VCTs since January 2016. The new growth capital portfolio has shown substantial revenue growth in its previous financial year.

As a result, the Maven VCTs are now a blend of more mature management buyout investments, early-stage high-growth private companies, AIM-quoted companies, private equity investment trusts and cash or cash equivalents.

When considering NAV movements plus dividends reinvested over the previous 10 years to 30 September 2020, Maven Income & Growth VCT and Maven Income & Growth 5 VCT have generated NAV total returns of 99.0% and 88.0% respectively. Past performance is not a guide to the future.

The current offer is seeking to raise up to £20 million for Maven Income and Growth VCT (“Maven VCT 1”) and Maven Income and Growth VCT 5 (“Maven VCT 5”). Each VCT is raising £10 million with an overallotment facility of £10 million.

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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Highlights

  • Broad selection of mature investments, plus expanding portfolio of younger companies offering growth potential
  • Strong regional presence with 10 offices across the UK 
  • Highly regarded and well resourced team 
  • Maven has been one of the most active VCT managers, backing 43 new early-stage high-growth companies since January 2016
  • Available for 2020/21 and 2021/22 tax years
  • Early bird discount of 1.25% (1.5% for existing shareholders)
  • 0.10% annual rebate for three years
  • Minimum investment £5,000 – you can apply online

The manager

Seasoned VCT investors will be familiar with Maven Capital Partners. It is a specialist manager of venture capital, private equity and unquoted investments, headed up by managing partner Bill Nixon. 

Maven began life as the private equity and VCT arm of Aberdeen Asset Management before Bill Nixon and the senior team led a management buyout in 2009. 

Maven tends to invest in the regions, as well as in London and the South East. It has nationwide coverage through its 10 offices spread across the UK, allowing it to see and take advantage of opportunities its peers might not come across. Maven also manages funds for the British Business Bank.

The management of the VCTs is split between two teams. The fund management team, which consists of 20 investment professionals, is responsible for sourcing, executing and managing the VCTs’ investments, whilst the portfolio management team, which consists of five investment professionals, is responsible for generating and protecting shareholder value, planning exits and monitoring performance. Members of both teams operate from across Maven’s network of regional offices. Both teams are overseen by the board of each VCT.

In total Maven has over £660 million under management or available to invest across all its investments. Maven and its senior management team have invested more than £4.3 million in Maven VCT offers.

Watch our new video interview with Bill Nixon of Maven Capital Partners:

Investment strategy 

Maven VCT 1 was founded by Murray Johnstone, part of Aberdeen Asset Management, in 2000. Originally known as Murray VCT 4, the VCT was renamed after the senior private equity team at Aberdeen Asset Management led a buyout to form Maven in 2009. It has been managed by the same team since 2004. In contrast, Maven VCT 5 (previously known as Bluehone AiM VCT2 plc) started life as an AIM VCT and was managed by Bluehone Investors. In 2011, the VCT’s board awarded Maven the management contract due to its experience and resources within the unquoted market. Maven was given an investment mandate to broaden the asset base away from the VCT’s highly concentrated AIM portfolio. Although Maven VCT 5’s AIM exposure has reduced significantly to 21% (May 2020), it still has the largest exposure to AIM of all the Maven VCTs. 

Maven’s investment team applies the same broad investment strategy across all its VCTs. It targets established, entrepreneurial businesses, led by proven management teams which Maven believes have robust growth prospects. It concentrates on companies available at attractive entry multiples, which can generate regular income and have the potential to achieve medium to long-term capital appreciation – although this is not guaranteed.

The VCTs will focus primarily on unquoted investments but will consider AIM opportunities as well. The investment team believe this “hybrid” strategy to be superior as the two asset classes have different return profiles and could therefore provide balance and diversity to the portfolio. 

Maven’s UK-wide coverage and investment resources enable it to access a wide range of private company opportunities. Every transaction goes through a structured three-stage investment approval process, led by the relevant Maven regional deal executives and supported by the collective knowledge and expertise of Maven’s UK-wide team. Managing partner Bill Nixon, who leads the investment committee, has the final saying on any new investment. 

Typically, Maven invests £2 million or more per VCT deal in total and benefits from the combined size of its VCTs, which allows the VCTs to invest in each transaction. Together the VCTs have £216 million in net assets (October 2020) and the co-investment policy allows each VCT to take a relatively small position in each deal. This can help Maven spread the risks associated with the increased focus on smaller early-stage businesses, potentially allow it to complete a larger number of investments and build a more diversified portfolio: remember VCTs are high-risk investments.

Exit track record

In the period since January 2016, Maven has achieved 13 profitable private company realisations in which one or both of the VCTs were invested. These realisations have generated total return multiples of up to 5.0x cost and an average total return multiple of 2.9x cost. Please note, past performance is not a guide to the future. 

GEV Holdings – Maven VCTsGEV Group – example of previous exit

Established in 2008, GEV operates an energy services business with a speciality in renewable wind power.

Having originally targeted the UK oil & gas sector, the business pivoted into renewable energy following the appointment of David Fletcher as Managing Director. Today, GEV is one of Europe’s market leaders in wind turbine repair and maintenance. 

Since establishing its dedicated GEV Wind sub-division in 2012, the company secured a number of key service agreements, including Siemens, the largest manufacturer of wind turbines in Europe. This helped the business grow significantly, with revenues increasing from £2.5 million in 2012, to £15.6 million by 2019. 

Maven invested £5.4 million in 2015 to support the MBO of GEV. The company was acquired by private equity investor Bridges Fund Management in 2019, achieving a total return multiple of 2.7x. Please note past performance is not a guide to the future. 

Motokiki – example of previous failure

Investing in VCTs is not without risk and there have been failures in the portfolio. One example is Motokiki.

Motokiki was the UK’s first price comparison site for tyres. It collated pricing and availability of tyres for a wide range of suppliers, offering consumers an impartial comparison depending on their personal preferences. 

The company initially secured £3 million in funding, split equally between Maven and the Development Bank of Wales. However, as a result of a change in strategy, the business struggled to maintain the rate of sales traction. An agreement could not be reached among the company’s remaining investors to provide further financial support, leading to the company entering administration in October 2019. 

Covid-19 impact

The pandemic has created a challenging environment for many businesses but particularly those with consumer-based models. Fortunately, the VCTs have relatively little direct exposure to the retail, leisure, hospitality, and entertainment sectors. Maven’s investment approach favours companies in less cyclical and more defensive sectors, which often have contracted revenue streams. 

At the onset of the pandemic, Maven asked each of its investee companies to prepare an impact statement including detailed cash flow forecasts and the anticipated effect of lockdown. Over the short term, businesses have been able to cut costs with the support of Government schemes and prepare for their next challenges. 

Maven undertook a full review of its portfolio in March 2020 and adjusted the valuation for specific companies in consumer-facing sectors. This resulted in a reduction in NAV per share for both Maven VCT 1 and Maven VCT 5. Maven VCT 1 saw its NAV fall from 46.37p in December 2019 to 43.49p. Maven VCT 5 saw its NAV fall from 37.37p to 32.89p (after going ex-dividend). Both trusts have since recovered and are broadly flat in the year to 30 September 2020. The majority of the portfolio has continued to trade satisfactorily, in Maven’s view. Past performance is not a guide to the future.

Current portfolio overview

All the Maven VCTs have a similar portfolio, follow the same investment strategy and will look to co-invest on all future deals, although some deals may be too small for all VCTs to participate. 

Historically, a significant differentiator has been each VCTs’ exposure to AIM. 

Maven VCT 5 has the greatest AIM exposure (21% of net assets, May 2020), Maven VCT 1 the smallest (2.2% of net assets, August 2020). This difference is largely due to Maven VCT 5’s background as an AIM VCT, and strong performance from its two largest holdings: Ideagen Plc, and Water Intelligence Plc. Together, these two stocks account for 12.6% of Maven VCT 5's net assets and 60% of its AIM exposure.

Currently, Maven VCT 1 has a portfolio of 86 companies while Maven VCT 5 has 106. Regarding the unquoted portfolio, the VCTs have a similar allocation to growth capital investments (now the largest segment for each VCT) which make up 29.7% to 37.6% of net assets for Maven VCT 1 and Maven VCT 5 respectively. Both VCTs have approximately 30% of their net assets in cash, cash equivalents, or money market and short-term fixed-interest unit trusts. 

With regards to the new growth capital investments, Maven has provided revenue data for 34 of the companies it has invested in since 2016 which are still in the portfolio, and for which there is two years of accounts data. On average, these companies have grown revenue by 63.9% in their last financial year. 

The current portfolio breakdowns are shown below.

*This also includes an £87k allocation to a UK based REIT.
 
Source: Maven Capital Partners, August 2020 (Maven VCT 1) and May 2020 (Maven VCT 5).

Examples of portfolio companies

Ideagen – Maven Income and Growth VCTsIdeagen (AIM quoted)

One of the world’s fastest-growing software companies, Ideagen provides operational assistance to businesses in highly regulated industries, such as aviation, banking, and healthcare.

Ideagen offers a range of software packages, all aimed at optimising business processes and improving productivity whilst reducing costs and strengthening compliance and risk management. This has afforded the company with a wide user base, with clients ranging from Luxembourg Air Rescue to established brands such as Heineken.

In the last ten years, Ideagen has expanded rapidly, acquiring 19 companies, and increasing its client base by more than 23,000%. In its full-year results to April 2020, the business reported revenue growth of 21%. Its chief executive noted trading for the first quarter of the new financial year had remained robust, with strong demand from the financial services and pharmaceutical sectors. 

Ideagen is the largest holding in Maven VCT 5, representing just over 10% of its total net assets. The trust first invested in May 2005. The holding is currently valued at £4.44 million at a cost of £162,000 (31 May 2020). Ideagen is not held within the Maven VCT 1 portfolio. 

Quorum Cyber – Maven Income and Growth VCTsQuorum Cyber Security (unquoted)

While the UK is one of the world’s leading digital nations, it is also one of the most competitive, with over 1,000 security firms active in this space. The rapid growth of this sector has been attributed not only to the increased threat and sophistication of cyber-attacks but also growing awareness within companies to protect from and prevent vulnerabilities. 

Quorum Cyber Security (“Quorum”) has set itself out as a market leader in this competitive sector by offering its customers a wide range of professional and managed security services. This includes preventative measures such as attack simulations and setting defensive standards to specialist forensic and investigatory services for companies that may have suffered a breach in the past. 

The Maven VCTs led the company’s Series A investment round, alongside the Scottish Investment Bank, in July 2020. The funding will be used to scale the business, and in particular, to accelerate its international expansion to Australasia, South Korea, and North America. 

Performance and dividends

Over the last five years to 30 September 2020, Maven VCT 1 has paid an average annual dividend of 6.84p per share, while Maven VCT 5 has paid an average annual dividend of 2.68p per share. 

As at 31 August 2020, the VCTs have a net asset value of 44.35p (Maven VCT 1)  and 35.76p (Maven VCT 5)  respectively. Unlike most other VCTs, Maven does not specify a dividend target. While Maven aims to make dividend payments where possible, it is expected that, as a result of VCT rule changes since 2016 which have required VCTs to have an earlier-stage focus, and impacted frequency and level of dividends for most VCTs, distributions will become more closely linked to realisation activity. Please note, past performance is not a guide to the future, dividends are variable and not guaranteed.

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 31/12/2014 - 30/09/2020.
Source: Morningstar. Past performance is not a guide to the future. Dividends are variable and not guaranteed. Dividends paid per calendar year to 30 Sep 2020.

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. 

Maven VCT 5 has significant exposure to AIM. AIM shares can be very volatile and could suffer extreme volatility if the market falls sharply.

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.

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 5.5%
Early bird discount 1.25%
Wealth Club initial saving 3%
Existing shareholder discount 0.25%
Net initial charge through Wealth Club (new investors) 1.25%
Net initial charge through Wealth Club (existing shareholders) 1%
Annual management charge From 1.675% (see details below)
Annual administration charge See details below
Performance fee See details below
Annual rebate from Wealth Club (for three years) 0.10%

More detail on the charges

Deadlines 

  • Apply by 29 January 2021 (noon) to qualify for the early bird discount of 1.25%, or 1.5% for existing shareholders
  • Application deadline for 2020/21 tax year: 30 March 2021 (noon)
  • Application deadline for 2021/22 tax year: 30 April 2021 (noon)

Dividend re-investment scheme (DRIS)

The company operates a dividend re-investment scheme which enables shareholders to reinvest any future cash dividends in Ordinary shares. These new shares should qualify for VCT tax reliefs that are applicable to subscription for new VCT shares, however, please remember tax rules can change and depend on circumstances.

The Dividend Re-investment Scheme was briefly suspended in early 2020 to reflect the volatility within the financial markets. Each trust has since reinstated its DRIS. 

Share buyback policy

Both VCTs operate a policy of purchasing their own shares as they become available in the market at a discount of between 5%–10% (Maven VCT 1) and 10-15% (Maven VCT 5) of the latest published Net Asset Value (NAV). However, there is no guarantee that either company will buy back shares. Please note, this discount control mechanism does not prevent the share price periodically trading at discounts greater than 5%–15% of NAV.

Annual rebate when you invest through Wealth Club

The VCT offer 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. You will find the terms and conditions for annual rebates within our Terms of Business.

Our view

In our view, Maven has a well resourced and experienced investment team. The VCTs benefit from Maven’s strong regional presence – a resource it appears to have put to good use, investing in over 40 new early-stage growth companies since January 2016. It is these new early-stage investments which the manager expects to drive performance for both VCTs in future, although there are no guarantees. 

As new investments are made and the VCTs raise more funds, the proportion of the portfolio in legacy investments decreases. However, those legacy investments continue to provide a modest income to the VCTs. 

Both VCTs also contain a large allocation to cash or readily realisable investments. This should enable Maven to continue supporting its early-stage investments. Bill Nixon believes the ability of venture capital investors to provide follow-on support will be critically important to generate future investment returns. Maven VCT 5 also has a material weighting in AIM, almost two-thirds of which is invested in two AIM stocks, Ideagen and Water Intelligence.

Maven has a strong reputation for management buyouts and is well known to seasoned VCT investors. In the last four years, it has also become a highly active early-stage investor. Investors in the VCTs gain access to a diverse portfolio of 86-106 underlying companies across new early-stage investments, legacy investments, AIM stocks, private equity investment trusts in addition to a large allocation to cash. 

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

Type
Generalist
Target dividend
Initial charge
5.5%
Initial saving via Wealth Club
4.25% (4.5% existing shareholders)
Net initial charge
1.25% (1% existing shareholders)
Annual rebate
0.10%
Funds raised / sought
£3.5 million / £40.0 million
Deadline
29 Jan 2021 (noon) for early bird
Last updated: 26 October 2020

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