ProVen VCTs

Offer fully subscribed

  • As of 22 Feb 2021, ProVen VCT is fully subscribed
  • As of 24 Feb 2021, ProVen Growth & Income VCT is fully subscribed 

Applications already received are being processed on a first-come, first-served basis. 

The two ProVen VCTs – ProVen VCT (PVN) and ProVen Growth & Income VCT (PGI) – are the longest-standing VCTs with a focus on growth investing. 

Many successful companies, from Watchfinder to Chargemaster, have come out of their stable. Indeed, a string of profitable exits in their recent history has resulted in large dividend payouts and healthy returns for investors. 

The combined portfolio has a bias towards software and e-commerce businesses (53.1% of invested assets). It includes several companies that are generating strong revenue growth, three of which (MPB, Papier and ContactEngine) are amongst the 100 fastest-growing private technology companies in the UK, according to the Sunday Times Sage Tech Track 100. As with any established VCTs, there have been failures too. 

Over the last 10 years, ProVen VCT and ProVen Income and Growth VCT have produced total returns of 82.1% and 60.5% respectively. Past performance is not a guide to the future.

Under the current combined offer, the two VCTs aim to raise £40 million (with each intending to raise up to £20 million). There is also an overallotment facility of £20 million (£10 million per company). 

VCT Offer capacity Funds raised* Overall capacity remaining
ProVen VCT £20.0m £20.0m FULL (22 Feb)
ProVen Growth & Income VCT £20.0m £20.0m FULL (24 Feb)

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.

Highlights

  • Large and long-established VCTs with total assets of £238.8 million (Aug 2020) 
  • Focus on growth capital since inception
  • Diverse portfolio with over 50% invested in ecommerce and SaaS sectors
  • Target dividends of 5% of NAV – exceeded by both VCTs in the last five full financial years. Dividends are not guaranteed and past performance is not a guide to the future
  • Experienced management team
  • 0.10% annual rebate for three years when you invest through Wealth Club
  • Available for this tax year (2020/21) and next (2021/22)
  • Minimum aggregate investment £5,000 (min £2,500 per VCT) – you can apply online

The manager

Beringea LLP has managed the ProVen VCTs since inception. It is an award-winning specialist venture capital firm that manages around £244 million of assets in the UK. It is part of Beringea, a transatlantic investment firm with more than $745 million of assets under management. Beringea as a whole has successfully backed entrepreneurial businesses for over 30 years with a current portfolio of over 70 companies spanning the US, UK and Europe. 

The presence of investment teams in both the United States and the UK should mean an international perspective.

The VCTs are directly managed by a team of 10. This includes Founding Partner Malcolm Moss, Managing Partner Stuart Veale, and Chief Investment Officer Karen McCormick, alongside two investment directors and five further investment professionals.

Meet the manager – watch a video interview with Karen McCormick, CIO at Beringea

 

Investment strategy

The ProVen VCTs are over twenty years old. PVN is the elder of the two and has been a generalist fund since its inception (2000), whilst PGI (launched in 2001) initially focused on the media sector but this changed in 2006. Unlike many VCTs of the same vintage, the ProVen VCTs have always focused on growth capital investments rather than management buyouts. 

Over the years, the funds have progressively converged towards identical investment mandates. Today, it is expected they will mirror each other and co-invest on each new deal, albeit in different amounts. So, although the overlap is high, there are differences between the underlying portfolios. For instance, Fnatic, a global esports team, is the largest position within PGI but a smaller position within PVN. 

Beringea considers an ideal investee company should have a proven commercial business with an exceptional team capable of taking the company to exit.

Both VCTs have a strong bias towards Software as a Service (SaaS) and ecommerce businesses, which together represent 53.1% of the combined portfolio.

The majority of the portfolio companies are tech-enabled and should have the potential, in Beringea’s view, to return 3-7x, although this is not guaranteed. Beringea will only invest in companies where it can be a key part of the team and have significant influence on the business. 

Exit track record

In the financial year to February 2019, the ProVen VCTs had some of the best returns in their history and paid large distributions to investors. They exited 10 investments, six of which profitably, including Watchfinder, Chargemaster, Think and Chess. The sale of Watchfinder alone realised a gain of £21 million for ProVen VCT, the largest gain achieved on a single disposal in its history. Past performance is not a guide to the future. After such an exceptional year, there were no realisations in the financial year to February 2020 – partly a reflection of the fact the remaining companies in the portfolio are still maturing. 

Watchfinder – ProVen VCTsWatchfinder – recent exit

Founded in 2002, Watchfinder was one of the first online platforms for enthusiasts to sell, buy and service pre-owned luxury watches.

Previously, this market was unreliable at best. By creating a trusted, user-friendly platform, Watchfinder quickly gained a loyal customer base in the UK and access to a global market worth $13 billion. It is now the leading global platform for pre-owned premium watches.

Beringea invested in 2014 to support Watchfinder’s capitalisation. By 2018, turnover had trebled and the company has delivered over £275 million in sales since inception.

Richemont, the Swiss luxury goods group, which owns brands such as Cartier, Van Cleef & Arpels, Jaeger-LeCoultre and Vacheron Constantin, bought the company in early 2018, generating a return of 8.89x for the VCTs. Past performance is not a guide to the future.

MEL Topco Limited (trading as Maplin) – example of previous failure

As can be expected, not all investments work out. One of the most high-profile examples is electronics retailer Maplin, which went into administration in February 2018. The ProVen VCTs invested £5 million in 2014. 

According to Karen McCormick, it was an unusual deal: Beringea was not the main party involved, which is what it normally prefers, but a ‘passenger’ that provided loan notes whilst a large private equity firm was in the driver’s seat. The investment structure helped limit the impact of Maplin’s failure on the VCTs. Beringea started to downgrade the holding valuation in 2016. After the company went into administration, Beringea had priority over the equity investor and received some distributions from the administrator. 

Covid-19 impact

At the onset of the Covid-19 crisis, the ProVen VCTs had just come to the end of a successful fundraising period, so had a strong cash position which enabled them to support their portfolio companies where required. In addition to financial support, Beringea arranged a series of weekly virtual “huddles” with portfolio companies on topics ranging from accessing government support, to managing finances and motivating workforces.

The portfolio has limited exposure to hospitality but counts several online retailers within its portfolio, as well as businesses with recurring revenue business models. The sectors favoured by the ProVen portfolio appear to have offered some protection against the economic impact of the crisis.

The underlying portfolio appears to be performing well, with over 50% of the ProVen portfolio generating year on year revenue growth of over 25% (September / October 2020). However, as is to be expected from a diverse portfolio, there have also been some write-downs.

In March 2020, Beringea promptly issued an updated net asset value for each VCT. The NAV of PGI reduced from a financial year end (Feb 2020) NAV of 58.6p to 54.6p. The NAV of PVN fell from 70.1p to 65.1p. The NAVs have since recovered somewhat: PGI’s NAV is now 55.3p after paying a 2p dividend, whilst PVN’s NAV is now 67.3p after paying a 2p dividend (August 2020). Past performance is not a guide to the future.

Portfolio overview

The combined portfolio contains around 50 companies (August 2020), offering a blend of new and maturing growth assets which have the potential to seek an exit in the coming years, although this is not guaranteed.

With regards to the maturity of the portfolio, the combination of several large exits and successful fundraising (over £100 million in the 18 months to August 2020) has resulted in a portfolio that it is now younger and with a higher proportion of its capital in more recent investments. 

In the current year to August 2020, Beringea has made 14 investments totalling £22 million. ProVen’s growing list of successful founders has helped create proprietary deal flow. As an example, the recent £2.7 million investment into Luxury Promise, the pre-owned luxury handbag marketplace, was introduced to Beringea by one of the co-founders of previous portfolio company and successful exit Watchfinder.

Source: Beringea. As at 31 August 2020.

Example portfolio companies

Fnatic – ProVen VCTsFnatic – largest holding (PGI) 

Founded in 2004 in London, Fnatic is a leading esports brand. Esports is the collective term for competitive professional (video) gaming. Professional gamers can be signed by a team, much the same as a professional footballer: they play tournaments, win cash prizes and can have lucrative sponsorship deals. 

Today, the global esports industry is big business. In 2019, for instance, the top esports tournament, the League of Legends World Championship, had over 100 million viewers, more than the Superbowl. As a result, esports is attracting the attention of global brands keen to partner with leading teams. It is reported that 2020 will see the industry generate revenues in excess of $1 billion, up 15% compared to 2019. 

Fnatic claims to be one of the most successful esports brands of all time, winning more tier 1 game tournaments than any other team globally. It is the world's second most-watched team in 2020 and has recently partnered with BMW, AMD, and Monster energy drinks.

The combined Proven VCT stake is valued at £9 million (August 2020). The investment has been used to support the appointment of a new leadership team, including the former Mercedes AMG Formula 1 Chief Executive Nick Fry as chairman. 

Too often, investors highlight esports as an ‘up-and-coming’ and ‘burgeoning’ industry. It should be clear that esports has arrived and now represents one of the world’s leading entertainment sectors.

Karen McCormick, Chief Investment Officer, Beringea

Luxury Promise – ProVen VCTsLuxury Promise – recent investment 

Luxury Promise is an online premium marketplace for buying, selling – or even swapping – luxury fashion and accessories, particularly designer handbags from brands such as Hermès, Chanel, and Louis Vuitton.

Officially launched in 2017 by Sabrina Sadiq, a former lawyer and experienced luxury goods authenticator, Luxury Promise claims to be the world's first resale platform to evaluate, authenticate, sell and buy pre-loved luxury goods using artificial intelligence to help price and authenticate items.

A vendor can submit a picture online and receive an instant valuation. When an item is sold, the vendor sends it to Luxury Promise, which authenticates it, repairs it if needed, sends it to the buyer and receives a commission on the sale. 

Since launching in London, the business has expanded to Dubai.

The pre-owned luxury goods market appears to be booming, driven by an increasing focus on sustainability. In the US, the market for resale has grown 21 times faster than the retail apparel market over the past three years, reaching a value of $24 billion today, projected to hit $51 billion by 2023, according to GlobalData. This trend is particularly prominent among millennial and Gen Z consumers.

In the six months to August 2020, the ProVen VCTs each invested £1.35 million into the business, following a referral from Lloyd Amsdon, co-founder of previous successful exit, Watchfinder. Mr Amsdon is also an early investor in Luxury Promise.

Performance and dividends

The ProVen VCTs have a strong long-term performance track record driven primarily by profitable exits. 

The six profitable exits in FY 2019, for instance, have supported large capital distributions: £59.6 million of dividends has been paid to investors in the period 28 February 2018 to 30 August 2020. 

Notably, the realisations have historically achieved significant average uplifts to the last valuation (from 21% to 41%). 

This can be explained, at least in part, by its conservative valuation policy. Beringea views the practice of valuing investments based on the valuation of the most recent fundraising round with some skepticism and in many cases prefers market-based valuations.

In our view, this is a healthy approach for investors in the longer term. It means an exit can command a sizeable premium to the net asset value, as has indeed been the case in previous financial years. It also means investment returns are more reliant on realisations and may be sporadic as a result. 

Over the past 10 years, ProVen VCT and ProVen Income and Growth VCT have produced returns of 82.1% and 60.5% respectively. Past performance is not a guide to the future.

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 2015 to 31 Dec 2020.

The VCTs have a target annual dividend yield of approximately 5% of Net Asset Value, not guaranteed. The dividend track records for both VCTs are shown below to 30 September 2020. Both ProVen VCTs have subsequently paid an additional 1.5p dividend in November 2020. 

Both VCTs have exceeded their target in the last five full calendar years, achieving an average annual dividend of 10.7p (PVN) and 6.7p (PGI) respectively.

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

Tax rules can change and benefits depend on circumstances.

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. Please note: both existing shareholders and their spouses can benefit from the existing shareholder additional early bird saving. 

Please note, capacity – for the offer or any early bird savings – can be reached early, and we may not be notified of this by the VCT in real time.

Full initial charge 5.5%
Early bird discount
Wealth Club initial saving 2.75%
Existing shareholder discount
Net initial charge through Wealth Club (new investors) 2.75%
Net initial charge through Wealth Club (existing shareholders) 2.75%
Annual management charge 2%
Annual administration charge £121k
Performance fee 20%
Annual rebate from Wealth Club (for three years) 0.10%

More detail on the charges

Dividend Reinvestment Scheme

The companies operate a dividend reinvestment scheme, which enables shareholders to reinvest any future cash dividends. 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.

Deadlines

  • 2020/21 tax year: 31 March 2021 (5pm)
  • 2021/22 tax year: 30 April 2021 (5pm)

Share buybacks

The VCTs operate a policy of purchasing their own shares as they become available in the market at a discount of approximately 5% to the latest published NAV. However, there is no guarantee that either company will buy back shares. The discount to NAV could also be greater or less than 5%. 

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

The ProVen VCTs have a long and successful track record of growth capital investing. They have achieved several profitable exits in recent years and generated substantial capital distributions to investors. These exits, combined with a successful period for fundraising which attracted over £100 million of fresh capital, have shifted the balance in the ProVen VCTs’ combined portfolio in favour of newer investments. It is the fortunes of these investments, and their potential to achieve profitable exits that will determine the future returns for investors. 

Beringea has been backing entrepreneurial businesses for the last 30 years and has a highly experienced management team. The VCTs have continued to deploy capital throughout 2020, and they have an encouraging pipeline of new investments which include some referred by previous ProVen-backed founders – in other words, yesterday’s winners are contributing to today’s deal flow. 

In our opinion, this is one of the stronger VCT offers currently available, from a highly credible management team; you should form your own view.

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
-
Initial saving via Wealth Club
-
Net initial charge
-
Annual rebate
-
Funds raised / sought
£40.0 million / £40.0 million
Deadline
CLOSED
Last updated: 3 December 2020

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