Maven Income & Growth VCTs

Maven Capital Partners has opened a joint offer of up to £15 million for Maven Income and Growth VCT 3 plc (“MIG3”) and Maven Income and Growth VCT 4 plc (“MIG4”). Each VCT is raising £7.5 million. This is a small offer with no overallotment capacity which is likely to fill up quickly. So if you wish to invest, it might be wise to act soon.

The Maven team is highly regarded and has a strong regional focus, allowing access to deals more London-centric VCTs might miss. Maven Capital Partners manages the Maven Income and Growth VCT and four others – Maven Income and Growth VCTs 3, 4, 5 and 6. 

Highlights

  • Broad selection of mature investments, plus expanding portfolio of younger companies offering growth potential
  • Strong regional network – expanded further in 2017 and 2018
  • Highly regarded and well resourced team 
  • Maven has been one of the most active VCT managers since rules became more restrictive, with 35 new investments completed since the rule changes
  • Minimum investment £5,000, you can apply online
  • 0.10% annual rebate through Wealth Club, paid for three years

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

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 by managing partner Bill Nixon. There are five Maven Income and Growth VCTs although it is expected that MIG4 and MIG6 will merge in December 2019, subject to shareholder approval.

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 rather than in London and the South East. It has nationwide coverage through its twelve offices in Aberdeen, Birmingham, Bristol, Durham, Edinburgh, Glasgow, London, Manchester, Newcastle, Preston, Nottingham and, most recently, Reading, allowing it to see and take advantage of opportunities its peers might not come across. Maven also manages funds for the British Business Bank.

Maven has a large, well resourced investment team of over 90 investment professionals – one of the largest of any VCT. It has made significant efforts to increase its deal flow and portfolio management team over recent years to maintain high standards of support for its younger investee companies. In total Maven manages over £660 million across all its investments. Maven and its senior management team have invested more than £4 million in Maven VCT offers. Maven executives and the directors of the VCTs intend to make a significant investment in the current offer. 

Investment strategy 

MIG3 and MIG4 were founded by Aberdeen Asset Management in 2001 and 2004 respectively. The VCTs were renamed after the senior private equity team at Aberdeen Asset Management plc led a buyout to form Maven in 2009. MIG4 has been through several mergers and now incorporates Gateway VCT, Ortus VCT and, most recently, Maven Income and Growth VCT 2 from November 2018.

Maven’s investment team applies the same broad investment strategy across all its VCTs. It targets established, entrepreneurial but often unglamorous 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.

Maven’s UK-wide coverage and investment resources enable it to access a wide range of suitable private company opportunities. It is “all about the regions”. It generates introductions to approximately 800-1,000 new opportunities each year across the regions. These are then subject to filtering. 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 to £8 million per deal in total and benefits from non-VCT money to invest alongside. This enables larger deals and allows the VCTs to occasionally invest in more mature, but still VCT-qualifying, businesses. The VCTs will focus primarily on unquoted investments but will consider AIM-listed opportunities as well. 

Co-investment can also help Maven spread the risks associated with the increased focus on smaller, less mature businesses resulting from the new VCT regulations, and complete a larger number of investments in order to diversify – although there are no guarantees.

Investors can expect the majority of the portfolio initially to be made up of management buyout, development capital, acquisition finance and replacement capital deals. Over time, the balance is expected to shift more towards earlier-stage investments.

Exit track record

Maven has a strong track record of exits. Since 2015 it completed 14 realisations, delivering returns of up to 7.1x cost, although past performance is not a guide to the future.

Maven Income and Growth VCT – Just-TraysJust Trays – recent exit

Just Trays (JT Holdings (UK) Ltd) was established in 1988 and has since grown to become the UK’s leading manufacturer of shower trays and related accessories. All design, development and production are undertaken at its main facility in Leeds.

Maven made a multi-million pound investment across all its VCTs to back the management team in a secondary MBO deal in 2014. Under the current management team, the business has demonstrated its resilience through different economic cycles, maintaining profits in a market hit by the UK recession.

Maven exited Just Trays in June 2019 in a trade sale to bathroom company Kartell, generating a return of 2x on its initial investment. Past performance is not a guide to future returns.

Chic Lifestyle– example of failure

As is to be expected, not all investments work out. Chic Lifestyle, which operated boutique hotel booking platform Chic Retreats, is an example. The company was established in 2012. Maven invested a total of £2 million in November 2016. The company encountered difficulties completing the next round of funding and as a result, it was eventually placed into administration in July 2018.

Current portfolio overview

All five VCTs have similar portfolios and will co-invest on all deals unless the offer is very small. Historically, the biggest difference has been the VCTs’ exposure to AIM which ranged from 35% to 5%. Going forward, the level of AIM is likely to increase in the VCTs with lower exposure but only marginally. The backbone of the VCTs will be qualifying, unquoted companies, with AIM investments added only to complement the existing portfolio and provide diversity. This gives the investment team flexibility to exit positions if there is a positive movement without risking the VCTs’ qualifying status. 

The current portfolio breakdowns are shown below:

Source: Maven, as at 31 May 2019 (MIG4) and 30 June 2019 (MIG3).

Source: Maven, as at 31 May 2019 (MIG4) and 30 June 2019 (MIG3).

Both MIG3 and MIG4 are very similar portfolios with comparable asset allocation. Currently, MIG3 has a portfolio of 72 companies while MIG4 has 79. As a result of the VCTs’ current investment strategy, development capital deals now make up the largest proportion of the portfolio. 

In the six months to May 2019 MIG3 completed three new unquoted investments and nine follow-on ones. It also invested in two quoted companies. In the six months to June 2019 MIG4 completed five new investments (including the same three as MIG3) and nine follow-on investments. MIG4 also invested in the same two quoted companies as MIG3. 

Investee company examples

DPP – Maven VCTsEnsco 969 (trading as DPP) – largest holding

DPP is a maintenance and planning contractor for the leisure, hospitality and retail industries. Founded over 30 years ago, DPP originally began trading as a heating contractor but the business has since expanded and now employs over 280 people. 

The company acts as a ‘one-stop-shop’ for clients, offering both contractual servicing and project management. On the contractual side, DPP provides reactive and planned maintenance which can cover everything from compliance testing to disaster recovery. In addition, the team have also been responsible for planning and executing major redevelopments, often completing projects well within deadlines. 

Currently, DPP operates across London and the south of England and Wales and has secured over 6,000 contracts with restaurants, hotels, and bars. 

Combined, MIG3 and MIG4 invested just under £3 million into the company in 2013. It is currently the largest holding in MIG4 and the second in MIG3.

Rockar – Maven VCTsRockar 2016 Limited (trading as Rockar)

After running a car dealership for over twenty years, Simon Dixon founded Rockar after becoming frustrated with the consumer experience. 

Unlike the traditional dealership journey, Rockar emphasises flexibility and ease of use. From start to finish, customers can manage their financing plans, digital documentation, test drive bookings and vehicle customisation. 

Rockar first partnered with Hyundai in 2012 to open two digital stores. In this time, over 1,500 cars were sold with 94% of customers being new to the brand. Rockar now manages online stores with Ford, Mitsubishi and Jaguar Land Rover. 

Maven VCTs invested £2.5 million into the company in 2016 – the investment was used to continue the platform’s development. 

Mojo – Maven VCTsMojo Mortgages – new investment

Traditional mortgage applications can be expensive and time consuming. On average, it can take over three hours to apply and up to 40 days to receive an offer. In comparison, Mojo, an online broker, takes an average of 10 days from application to offer. 

Founded in April 2018 by Richard Hayes, Mojo looks to prioritise the customer experience. It has access to over 20,000 products from 90 lenders and offers customers the flexibility to complete applications at their own convenience as well as receive immediate feedback on the best options for them and free advice if required. 

The company won both Innovation of the Year and Best Mortgage Broker at the 2019 British Bank Awards. It was recognised for its unique technology and industry partnerships, winning out over competition from the likes of First Direct and Revolut. 

Maven co-led a joint £3.25 million investment alongside NVM Private Equity in February 2019. The investment will help support the company’s growth plans and continue its platform development. 

Performance and dividends

There is a progressive dividend policy on both VCTs rather than a specific pence per share target. The dividend track record is shown below.

Over the previous five full financial years, MIG3 and MIG4 have returned a substantial amount of capital to investors, in part to satisfy VCT rules where trusts must hold 80% of their assets in qualifying investments. MIG3 has achieved an average annual dividend of 9.1p per share, whilst MIG4 has produced an average annual dividend of 8.86p . Please note, past performance is not a guide to the future, dividends are variable and not guaranteed. We expect that dividend payments will become less consistent as both portfolios transition towards newer capital growth focussed investments over time. 

Source: Maven. Past performance is not a guide to the future. Dividends are variable and not guaranteed. Chart shows Net Asset Value and cumulative dividends (paid out) over five years, to 30 September, pence per share.

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 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 2.25%
Annual administration charge See offer documents
Performance fee 15%-20%
Annual rebate from Wealth Club (for three years) 0.10%

More detail on the charges

Deadlines

Invest by noon 24 January 2020 (cleared funds) to benefit from the 1.25% early bird saving (1.5% for existing shareholders). 

Dividend investment scheme (DIS)

The company operates a dividend 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.

Share buy-back 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% 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%–10% of NAV.

Our view

In our view, Maven has a well resourced and experienced investment team and is managing a mature portfolio of diverse investments. We like the strong regional presence – it means deal flow is unlikely to be a problem – as well as the maturity of both portfolios, which provide investors with the potential for a regular stream of income (not guaranteed).

In recent years, whilst dividend payments have been strong, total returns have been lower. We believe there are two key reasons for this. Firstly, the portfolios are in a transition phase: the new investments into earlier-stage growth-focussed businesses can take time to come to fruition. Secondly, as Maven is keen to stress, the team is reluctant to aggressively mark up the valuations of its recent earlier-stage investments based on subsequent funding rounds. As a result, many of these investment are held at cost.

On balance, we believe this is an offer worth of consideration. Investors are able to access the new early-stage investments, many of which are sourced from the regions, with the comfort of knowing Maven’s legacy investments could potentially provide ballast to the portfolio.

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%
Net initial charge
1.25% (1% for existing shareholders)
Annual rebate
0.10%
Funds raised / sought
£15.0 million sought
Deadline
24 Jan 2020 for early bird saving
Last updated: 15 November 2019

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