Northern VCTs

Offer fully subscribed

As at 5:30pm on Wednesday 9 March the offer has reached capacity and is closed.

Applications with cleared funds have been processed on a first come, first served basis. 

The Northern VCTs – Northern Venture Trust (NVT), Northern 2 VCT (N2VCT) and Northern 3 VCT (N3VCT) – are among the longest-standing in the industry, with a loyal following of investors. Previous share offers have filled quickly and the current offer is also expected to be popular.

The VCTs have combined net assets of £349 million (September 2021) across a portfolio of 60 companies. Over half of the portfolio is now invested in unquoted growth capital opportunities, with the remainder split between legacy assets and MBO investments. 

In the last five years the VCTs have generated NAV total returns (including dividends reinvested) of 47.88% (NVT), 41.63% (N2VCT), and 38.84% (N3VCT) – past performance is not a guide to the future. NVT and N2VCT target a dividend of 5% year, whilst N3VCT targets 4.5%.

The current offer is seeking to raise £40 million across the three VCTs. There is no overallotment facility. 

VCT Offer capacity Funds raised Capacity remaining
Northern Venture Trust £6.0m £6.0m CLOSED
Northern 2 VCT £17.0m £17.0m CLOSED
Northern 3 VCT £17.0m £17.0m CLOSED
Total £40.0m £40.0m
As at 9 March 2022 (5:30pm). Data is provided by Mercia.

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.


  • Longstanding and highly respected VCT manager, now part of the larger Mercia group
  • Targets annual dividends of 4.5% to 5% of NAV, not guaranteed
  • Combined net assets of £349 million and a diverse portfolio of 60 unquoted and quoted companies (September 2021)
  • Around 41% of the portfolio is in mature investments, predominantly from management buyouts, which could support dividend payments, with the remaining 59% in newer growth capital deals
  • 0.10% annual rebate for three years when you invest through Wealth Club
  • Invest across the three VCTs or pick and choose

The manager

The Northern VCTs are some of the longest-established, having launched in 1995 (NVT), 1999 (N2VCT) and 2001 (N3VCT). Until 2019, the VCTs were managed by NVM Private Equity LLP (“NVM”), under the lead of Tim Levett. 

In December 2019, NVM’s VCT business was acquired by Mercia Asset Management plc (“Mercia”) and NVM’s VCT investment management team moved across to form a new division within Mercia’s wider group, providing important continuity.

Mercia Asset Management is an AIM-quoted company that manages £948 million across venture capital, private equity, private debt, and its own balance sheet funds. The business has 11 offices throughout the UK.

Over the last two years, Tim has been working to develop, recruit, and integrate the NVM team with Mercia, and has now announced he will retire in March 2022, following a successful handover.

Responsibility for the VCTs will transfer to Peter Dines, COO of Mercia. In addition, three members of the NVM team, Aaron Lawson-Clark, Ishaan Chilkoti, and Jason Warren, have been promoted to partners. All three were recruited by Tim at NVM and will take on a greater role in building the VCT portfolio and managing the investment team under Peter’s guidance. 

  • Aaron Lawson-Clark joined the VCT team in September 2017, following 10 years in banking and institutional finance roles. Aaron will focus on investments in the North and will also set the deal origination strategy and targets for the whole VCT group.
  • Ishaan Chilkoti joined the VCT team in September 2018, having previously worked at Nesta, an early-stage impact investor. Ishaan has a particular interest in the EdTech and Consumer sectors and will oversee people development within the VCT team.
  • Jason Warren, one of Tim’s first recruits following the VCT rule changes, joined the VCT team in February 2017. Jason initially trained as a software engineer in financial services, holding positions at Morgan Stanley and Harmonic Capital. He is now responsible for deals within London and the Midlands and will take on additional duties in portfolio strategy and analysis.

Since the acquisition, there has also been considerable recruitment in the investment team, with the headcount nearly doubling from seven to 13 in two years. The team is spread across the UK, with each member maintaining a local network to help source opportunities and support portfolio companies post-investment.

Meet the manager: Watch a video interview with Aaron Lawson-Clark:


Investment strategy

All three Northern VCTs are generalists and have shared the same investment strategy since inception. The vast majority of the investments are common across all three portfolios. 

Prior to the 2015 VCT rule changes, NVM largely focused on management buyouts and has since shifted towards newer growth capital investments. To support this change, NVM recruited significantly to broaden the team’s experience, a trend which has continued under Mercia. 

The investment team believes a good partnership is key to making a deal work. Mercia prioritises capable and successful management teams but also those it believes have the ambition and passion needed to withstand the challenges of growing an early-stage business. Outside of management, the trusts look for businesses operating in sectors with strong growth potential, proven commercial traction, and good capital efficiency. 

Historically, investment opportunities were sourced from NVM’s established regional network of accountants, lawyers, and corporate finance houses. However, one of the primary reasons for approving Mercia’s acquisition was the opportunity to co-source deals with other Mercia funds and access a wider deal network. Today, the investment team benefits from significantly greater resources, including 11 regional offices, partnerships with 19 universities and a dedicated talent team to help source key management for investee companies. Over the last year, the VCTs have completed five co-investment deals with Mercia funds, in addition to several portfolio companies receiving investment or replacement capital from Mercia’s own balance sheet, showing the strategy in action. 

Exit track record

In the 13 months to December 2021, the VCTs have realised cash proceeds of £130 million. Of this, £80 million was generated from five exits in the pre-2015 portfolio and £50 million from seven exits in the post-2015 portfolio. Please note, past performance is not a guide to the future.

Oddbox – Northern VCTsOddbox – example of previous exit

Fresh fruit-and-veg box company Oddbox “rescues” otherwise perfectly good produce that’s too ugly for supermarket shelves and delivers it directly from farms to subscribers across London, the South and the Midlands. 

A surplus of up to 37,000 tonnes of “unattractive” produce can end up discarded before even leaving UK farms every year. With nearly three million boxes delivered since it launched in 2016, Oddbox has already saved 22,717 tonnes of food waste, the equivalent of how much food 49,385 people would eat in a year, and intends to save 150,000 tonnes by 2025.

The company has registered an exponential six-fold year-on-year growth in revenue in 2020 and has a highly loyal and engaged community.

The Northern VCTs first invested £2 million in Oddbox in March 2020 at a £6 million pre-money valuation. In August 2021, the company received a £16 million investment at a pre-money valuation of £100 million. The Northern VCTs partially realised their stake in the business in 2021, generating a 10.9x realised return, 18 months after initial investment. Past performance is not a guide to the future.

No 1 Lounges – example of previous failure

As can be expected, not all investments go to plan. An example is No 1 Lounges.

Founded in 2006, No 1 Lounges is an independent airport lounge provider. The company’s founder, Phil Cameron, used his experience as a frequent traveller to create a comfortable and convenient service.

The company opened its first lounge in New York’s JFK airport, then Heathrow, Edinburgh, and Gatwick. 

However, following the pandemic, the company was forced to close its locations and experienced significant periods without any income. The VCTs invested approximately £6 million in 2014, this investment has since been written down to nil.

Covid-19 impact

Mercia undertook a full valuation of the combined portfolio in March 2020. Subsequent revaluations, particularly within the leisure sector, led to a drop in NAV total return for Q1 2020 ranging from 13.43% to 15.38%. 

Despite this initial set back, the VCTs’ portfolio of predominantly e-commerce and software businesses fared well during the pandemic. Particularly strong performance came from e-commerce businesses Entertainment Magpie (now musicMagpie) and Oddbox, detailed above, as well as uplifts from several B2B software businesses (SHE Software, Intelling Group, and Clarilis), which together more than offset negative movements within the portfolio. In the period from March 2020 to September 2021, the VCTs generated NAV total return ranging from 48.34% to 51.90%. 

Current portfolio overview

The three Northern VCTs currently have a combined portfolio of 60 underlying investee companies, and net assets of £349 million.

The aggregate portfolio is split between new venture investments and more mature investments made prior to 2015. For the first time since the rule changes, all three VCTs now have more than 50% of their portfolio invested in post-2015 development capital deals. Furthermore, the weightings for MBOs (once a significant part of the NVM’s investment strategy) have decreased as the investment team continues to execute its strategy and rebalance the portfolio away from legacy assets.

The table below gives a more detailed view for each of the three VCTs.

VCT Development capital post 2015 Development capital pre 2015 MBO
NVT 63.1% 21.5% 15.4%
N2VCT 55.7% 31.6% 12.7%
N3VCT 51.8% 37.0% 11.2%
Source: NVM. Data as at 30 September 2021 (NV1) and 31 March 2021 (NV2 and NV3).

Over the last year, the VCTs invested £27 million in nine new companies, and £17.5 million in follow-on opportunities. The team is seeing a healthy flow of potential new investments in fast-growing sectors such as e-learning, deep tech, and biotech. Furthermore, the investment team has made its first two co-investments alongside other Mercia-managed funds, beginning to demonstrate the benefit of Mercia’s wider network. 

Combined sector breakdown (%)

Source: Mercia, September 2021

Examples of portfolio companies

musicMagpie – Northern VCTsmusicMagpie – largest holding

In 2007, Steve Oliver, a former record shop owner, launched a second-hand CD business out of his garage in Stockport. Fourteen years later, the business floated at 193p per share on AIM, implying a market cap of £208 million. 

Fundamentally, the core of the business is a simple reselling model. However, over the years the company has diversified its offering and is now both the UK’s largest mobile phone recycler and the largest third-party seller on Amazon and eBay.

The VCTs first invested in the business in 2015, for a total consideration of £4.5 million. Following the flotation in 2021, the trusts partially exited their position, generating £7.8 million in realised proceeds and £1.1 million as payment for outstanding loan stock. This, combined with a retained equity stake of 11.5% has generated a return of 11.8x on the total original investment. Past performance is not a guide to the future.

Currently, musicMagpie is the largest holding in all three trusts (September 2021). 

locate bio – Northern VCTsLocate Bio – recent investment

Developed by the Royal College of Surgeons in Ireland (RCSI), Locate Bio designs proprietary technologies aimed at regenerating bone and cartilage using next-generation stem cell technology. 

Stem cells are specialised cells that are fundamental to regenerative medicine because of their unique ability to transform into other cell types if they receive specific chemical or mechanical signals.

Locate Bio has engineered a suite of products which can provide powerful signals to drive the differentiation of stem cells into a specific cell type. So far, the company has focused on orthopaedics, with solutions capable of forming bone and cartilage. All four products are currently undergoing clinical trials, targeting formal market approval by 2022.

Mercia initially backed the company through its EIS funds in April 2018. The Northern VCTs participated in the company’s £10 million Series A round in September 2021, alongside BGF and other syndicate partners.

Performance and dividends

Over the five years to September 2021 the VCTs have generated NAV total returns (including dividends reinvested) of 47.9% (NVT), 41.6% (N2VCT), and 38.8% (N3VCT). In particular, the VCTs have seen 12 realisations in the 13 months to December 2021, generating £130 million in cash proceeds and supporting a special dividend payment of 4 – 6p in 2021. Past performance is not a guide to the future. 

The target annual dividend for NVT and NV2 is 5% of NAV and for NV3 is 4.5% of NAV, not guaranteed. The three VCTs have paid out total dividends per share of between 31p - 33p over the five years to December 2021, equivalent to 30.32% - 42.58% of the starting net asset value on 31 December 2016.

NAV and cumulative dividends per share over five years (p)

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 2016 to 31 Dec 2021.

Dividend payments in the calendar year

Source: Morningstar. Past performance is not a guide to the future. Dividends are variable and not guaranteed. Dividends paid per calendar year to 31 Dec 2021.

Average dividend yield (% of NAV) history

2017 14.78% 14.59% 10.34%
2018 5.72% 8.40% 5.86%
2019 5.83% 6.27% 3.78%
2020 6.16% 5.91% 4.59%
2021 13.36% 10.88% 8.68%

Source: Morningstar. Average dividend yields are based on the dividends paid over the period divided by the monthly average NAV of the VCT over the same period. Past performance is no 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. 

To retain the tax benefits, VCTs should be held for at least five years. If you sell VCT shares and reinvest in new shares of the same VCT (including any mergers) within six months, tax relief can be restricted. Tax rules can change and benefits depend on circumstances.

VCTs can now only invest new money in growth capital deals. Asset-based investments 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. The investment may have additional charges and expenses: please see the provider documents including the Key Information Document for more details, offer price and share allotment calculation methodology.

Full initial charge 4.5%
Early bird discount
Wealth Club initial saving 2.25%
Existing shareholder discount 0.5%
Net initial charge through Wealth Club (new investors) 2.25%
Net initial charge through Wealth Club (existing shareholders) 1.75%
Annual management charge 2.06%
Annual administration charge See offer documents
Performance fee 12%-15%
Annual rebate from Wealth Club (for three years) 0.10%

More detail on the charges


Unlike previous offers, there is no exclusivity period for existing shareholders. All applications, both from new and existing investors, will be processed on a strictly first come, first served basis. 

Dividend Investment Scheme

A dividend 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

The VCTs offer a share buy-back policy. Each VCT aims to buy back shares at a discount of 5% to the latest published NAV. Please note, any purchase is at the discretion of the board and the relevant VCT having both cash resources and distributable reserves available for the purpose.

Discount history

VCT shares are traded on the London Stock Exchange. Similar to investment trusts, the share price can fluctuate and can be different from the VCT’s net asset value (NAV), i.e. the value of the VCT’s underlying investments. The difference between the share price of a VCT, and its net asset value per share, is called the discount (or premium).

The charts show the five-year discount to net asset value history of the Northern VCTs based on the closing share price at the end of each month, divided by the latest net asset value at the time. Past performance is not a guide to the future. Investors looking to sell their VCT shares may get a better price using the VCT’s share buyback facility, although this is not guaranteed.

Northern VCTs – average five year discount to NAV history

Source: Morningstar, 31 December 2021. The discount chart shows the average discount of all Northern VCTs, calculated as the closing share price at the end of each month, divided by the latest net asset value at the time. Rolling 12-month average is this figure averaged over the year.

Annual rebate when you invest through Wealth Club

The Northern VCTs include 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 a percentage (shown in the table above) of the Net Asset Value of the Offer Shares issued to you when you invest. Terms and conditions apply.

Our view

The Northern VCTs have served investors well over the years and they are some of the most popular VCTs. 

In our view, they are an attractive option for experienced investors. The venture capital allocation has grown considerably and has been a key driver of performance in the last year – delivering £50 million in realised proceeds and several significant valuation uplifts. Furthermore, the portfolio’s exposure to more mature investments is expected to generate a level of investment income that could help to cover the dividend target each year, returns are, of course, not guaranteed.

Mercia’s acquisition of the Northern VCTs has started to show a positive impact, in our view. Over the last two years, the VCTs’ investment team has almost doubled in size and is now fully integrated within the wider Mercia group. In practice this has resulted in three key advantages: enhanced deal flow, a significant increase in resources, and greater potential liquidity for portfolio companies through Mercia’s institutional funds. 

The VCTs have a strong management team, a growing venture capital portfolio, and a strategy that is beginning to deliver encouraging results, noting that past performance is not a guide to the future.

How to invest

The most recent share offer reached capacity on 9 March 2022, having raised £40 million in 58 days.

You can browse other open VCTs here – or register your interest in the next Northern VCTs share offer below. 

Register your interest – Northern VCTs

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
£40.0 million / £40.0 million
Last updated: 10 January 2022

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