Unicorn AIM VCT

Unicorn AIM VCT raised £15 million in an oversubscribed share offer in 2020-21.

No share offer plans have yet been announced for 2021-22. Register your interest here to be notified as and when VCT offers open.

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Review: Unicorn AIM VCT

Below is our review of Unicorn AIM VCT’s previous offer (February 2021). This page will be updated when the new offer opens.  

Unicorn AIM VCT is the largest AIM VCT and the second largest of all VCTs, with net assets of £296.4 million. 

It invests predominantly in AIM stocks: a blend of more mature cash-generative companies and earlier-stage businesses across a variety of sectors. The VCT also invests in unquoted companies, two of which have experienced significant growth and now account for 20.3% of the total net assets of the trust (December 2020). 

Managed by highly regarded smaller-company investor Chris Hutchinson, the VCT has to date delivered attractive returns to investors and paid steady dividends despite the ups and downs of AIM. In fact, over 10 years it is the top-performing VCT open for investment: it has generated a total return of 175.3% (December 2020) – note, past performance is not a guide to the future.

The VCT aims to raise a total of £15 million. This is a relatively small offer, so could fill quickly. Note: existing shareholders will have priority until 11 February (5.30pm). New investors can apply during this period: their applications will be placed on a waiting list and processed in the order they are received from 12 February, provided there is any capacity left.

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

  • Largest AIM-focused VCT – £296.4 million net assets under management (31 Dec 2020) 
  • Established portfolio of over 90 companies (30 Sep 2020) 
  • History of steady dividend payments, a total of 35.0p in the last five years – dividends are variable and not guaranteed, and past performance not a guide to the future
  • Has shown resilience through market wobbles, recovering strongly in 2019 and 2020
  • Run by Chris Hutchinson, a very experienced AIM manager, supported by a highly regarded team of fund managers 
  • Unicorn has £1.4 billion of assets under management across its funds, and over £470 million invested in AIM 

The manager

Unicorn Asset Management Ltd (“Unicorn”) is a specialist fund manager with a bias towards smaller companies. Chris Hutchinson is the senior fund manager and has 19 years’ experience running portfolios of smaller-company stocks. Alongside this VCT, Mr Hutchinson is also the lead manager of the highly regarded OEIC, Unicorn Outstanding British Companies Fund. Chris is supported by a further two fund managers and two assistant fund managers. Collectively, the team is responsible for managing Unicorn’s suite of investment funds as well as its AIM IHT service. 

Unicorn is independently owned and managed. Around 60% of the company’s equity is owned by the directors, managers and family members. It has £1.4 billion under management, of which more than £470 million is invested in AIM-quoted companies.

The Unicorn AIM VCT launched in November 2001 and in March 2010 merged with Unicorn AIM VCT II (along with five share classes) to produce a single share class. The VCT also acquired the assets and liabilities of the Rensburg AIM VCT in 2016, which added £11.5 million to the VCT’s portfolio. 

Investment strategy 

Unicorn AIM VCT seeks to invest in largely AIM-quoted companies with the following characteristics:

  • Experienced and well motivated management teams
  • Products and services supplying growing markets
  • Sound operational and financial controls
  • Potential for good cash generation

Chris Hutchinson favours companies where the management owns a significant stake in the business and with a demonstrable track record of making money for shareholders. He is a firm believer that if the management has a big stake, they will be focused on the dividends as they are beneficiaries themselves. 

Unicorn has a cautious, “bottom-up” stock-picking approach, which favours spending time with investee companies and fully understanding them before investing for the long term.

Mr Hutchinson has in the past said: “Over 20 years, what I’ve learnt more than anything is that it’s not so much getting the ones that go up tenfold, but more about avoiding the ones that will blow up. You can only do that if you take a cautious approach, buying proper businesses with profit and cash flow.” 

There is no specific dividend target. Over the last five years, dividend payments have totalled 35.0p and ranged from 6.25p to 9.25p per share per annum – remember past performance is not a guide to the future.

The non-qualifying portion of the portfolio will be invested in a mixture of cash, blue-chip shares listed on the main market and the range of OEICs Unicorn manages.

Covid-19 impact

In response to the crisis, Unicorn sought to manage any additional downside to the portfolio where possible by limiting new investment activity, holding a higher level of cash and making select disposals of investments. Unicorn also sought to provide financial support to its portfolio companies where necessary. 

The VCT initially saw its net asset value fall to 128.4p (March 2020) from 173.6p (December 2019), after paying a 3p dividend. However, it soon began to recover alongside equity markets as governments and central banks across the globe provided unprecedented support to their economies. The VCT has since seen its net asset value rise to 204.5p (December 2020) and paid a 3p dividend. Unicorn believes this strong performance is due to the trust’s exposure to a number of sectors that have benefitted from changing behaviours brought on by the pandemic. For instance, the VCT has high exposure to technology, life sciences, financial services, and computer gaming businesses. Past performance is not a guide to the future.

Current portfolio overview

In the year to September 2020, the VCT invested £6.9 million. £4.2 million was in three new investments: The British Honey Company, Feedback Medical, and Ilika; £2.7 million was invested into follow-on opportunities. In the annual accounts to September 2020, the management of the VCT noted they considered the investment pipeline particularly strong, and anticipated investment activity to increase in the coming months. 

The current portfolio includes more than 90 companies. They are spread across diverse sectors and a range of market capitalisations. The portfolio currently has a bias towards biotechnology and software businesses, as well as earlier-stage businesses worth less than £50 million.

Source: Unicorn Asset Management, as at December 2020.
Source: Unicorn Asset Management, as at December 2020.

Whilst the VCT contains a portfolio of over 90 investee companies, the portfolio is concentrated within a smaller number of holdings. The top 10 holdings account for 48.6% of total assets. The trust’s two largest positions, Interactive Investor, and Hasgrove have performed strongly in 2020 and now account for 20.3% of total assets (December 2020). Both are unquoted investments rather than AIM stocks. 

Example portfolio companies

Interactive Investor – Unicorn AIM VCTInteractive Investor – largest holding (unquoted)

Interactive Investor is the UK’s second-largest online investment platform. 

Over the last three financial years, the value of the VCT’s stake has grown substantially. Interactive Investor is now its largest holding, accounting for 10.7% of net assets. Unicorn AIM VCT initially invested in the business in 2013. Following a series of successful funding rounds and a profitable acquisition of competitor Alliance Trust Savings, the value of the business rose from £39 per share in 2017 to £181 per share as at 30 September 2019. 

2020 proved the major catalyst for the business: it acquired The Share Centre, saw its revenues rise by 63% and its active customer numbers rise by 154%. The holding value of Interactive Investor has now more than doubled over the twelve months to September 2020 to £382.06 per share. This is at a discount to a recent funding round which valued Interactive Investor at £675 million, or at £441.62 per share. Past performance is not a guide to the future. 

Abcam – Unicorn AIM VCTAbcam – largest AIM-quoted holding

Abcam is the largest AIM-quoted holding within the VCT. 

Abcam is a global life sciences company that identifies, develops and provides antibodies and biological tools to the life science community to aid in research and development. Abcam’s products are used by more than 750,000 life science researchers in more than 130 countries. 

Over the last five financial years, Abcam has grown its revenues from £171.7 million in FY 2016 to £260 million in FY 2020. The business has a market capitalisation of £3.8 billion (January 2021). 

The VCT first invested in Abcam in 2005 and the holding is currently worth £15 million (September 2020), on an investment cost of £1.2 million. Past performance is not a guide to the future. Abcam accounts for 5.7% of the net assets of the trust. 

Ilika – Unicorn AIM VCTIlika – recent AIM-quoted investment 

Ilika describes itself as a pioneer of solid-state batteries – a smaller, higher-capacity and cheaper alternative to lithium-ion batteries. Solid-state batteries could be attractive to a variety of customers that require safe portable, flexible, fast-charging, high-energy batteries. Ilika has identified a wide range of target markets, including medical devices and implants, electric vehicles, industrial uses, and consumer electronics. 

Unicorn AIM VCT invested £1.2 million into the business as part of a £15 million placing in March 2020, at a price of 40 pence per share. Proceeds from the placing are to be invested in scaling up Ilika’s production capability and strengthening the company’s balance sheet. As at 31 December 2020, Ilika shares were worth 205p. Past performance is no guide to the future. 

Crawshaw Group – example of previous failure

As can be expected, not all investments work out. Meat retailer business Crawshaw Group is one such example. Founded in Yorkshire in 1954, the group had at one point more than 50 stores in the Midlands and northern England. 

Its shops specialised in prepacked sausages, chops and similar, alongside cooked chickens and ready meals, often cheaper than in the supermarket. 

The stock was one of the darlings of AIM in 2014 and went up almost eightfold over the year.

Unfortunately, Crawshaw Group struggled with increasingly tougher market conditions. In the six months to July 2018, the company posted a loss before tax of £1.7 million and in October 2018 it went into administration.

Unicorn AIM VCT invested at a book cost of £1.5 million in 2007 – the holding was written down to nil value.

Performance and dividends

The AIM market has been turbulent in recent years and the VCT has not been immune to this volatility, as investors might expect. 

2020 was a particularly challenging year. The VCT started the year with a Net Asset Value per share of 173.6p, following the onset of the pandemic, the trust saw its NAV fall to a low of 128.4p on 31 March 2020. 

However, aided in part by strong performance from the VCT’s two unquoted holdings, the VCT has recovered, ending the year with a NAV per share of 204.5p after paying 6.5p in dividends. 

Over the ten years to December 2020, Unicorn AIM VCT has produced a NAV total return of 175.3%. Over the last five years, it has paid total dividends of 35.0p per share and has grown its net asset value by 40.7p to 204.5p (as at 31 December 2020). Past performance is not a guide to the future; dividends are variable and not guaranteed.

Source: Unicorn Asset Management, Morningstar, as at 31 December 2020. Performance is calculated on a NAV total return basis with dividends reinvested, excluding tax reliefs. Past performance is not a guide to the future. Dividends are variable and not guaranteed.”
Source: Unicorn Asset Management. Dividends paid in calendar year. Dividends are variable and not guaranteed. 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.

Unlike VCTs investing in unquoted companies, AIM VCTs have a more natural exit route for shares as they are listed. However, dealing in large volumes of shares could be difficult. The size of the VCT could make this more of a problem.

AIM shares can be very volatile and could suffer extreme volatility if the market falls sharply. The difference between the buying and selling price of AIM-listed companies is often wider than 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. The investment may have additional charges and expenses: please see the provider documents including the Key Information Document for more details.

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 3.25%
Existing shareholder discount
Net initial charge through Wealth Club (new investors) 2.25%
Net initial charge through Wealth Club (existing shareholders) 2.25%
Annual management charge 2%
Annual administration charge See below
Performance fee
Annual rebate from Wealth Club (for three years)

More detail on the charges

Deadlines

This offer has now closed. 

Dividend Reinvestment Scheme

Unicorn AIM VCT now operates a dividend reinvestment scheme. The scheme provides for dividends to be reinvested in new shares at the latest published Net Asset Value (“NAV”) per share prior to the allotment.

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 VCT operates a share buy-back facility to allow investors to sell their shareholding back to the VCT at a discount to NAV. The discount is set at the discretion of the board. In 2020 the discount on share buybacks ranged between 11.0% and 18.7%. 

The share buyback policy is unlike other VCT share buyback policies, which purchase shares at a target discount to net asset value typically, 5% or 10%. This means investors may not be able to sell their shares at a similar level of discount as with other VCTs. However, the share buybacks have the potential to add to the performance of the VCT and benefit remaining shareholders. As at 31 December 2020, the discount to NAV of the trust was 20.3%, based on closing share price of 163p and a net asset value of 204.5p. 

The share buyback policy is subject to availability, and board and shareholder approval. Please see the offer documents for details.

Annual rebate when you invest through Wealth Club

There is no annual rebate for Wealth Club investors.

Our view

Unicorn is a highly regarded fund management business which specialises in investing in UK smaller companies. Chris Hutchinson has been lead manager of Unicorn AIM VCT since 2005 and is supported by an experienced fund management team. The team is responsible for managing a number of other successful UK investment mandates, including the £500 million Unicorn UK Income Fund. 

This is a high-profile investment team that has a long-term alignment of interest with investors through equity participation in Unicorn Asset Management.

The VCT has been the top-performing VCT open to new investors over the last 10 years, with a NAV Total return of 175.3%, although past performance is not a guide to the future. Its bias towards technology and healthcare sectors has helped it navigate the volatility in the AIM market in 2020, as businesses within those sectors found favour with investors. The VCT’s performance was further enhanced by strong performance from Interactive Investor and Hasgrove – both unquoted investments. Investors should note, 20.3% of the trust’s net assets are now invested in two unquoted companies.

In our view, Unicorn AIM VCT is a high-quality offering for experienced investors. The investment strategy is clearly defined, and the fund management team has a strong long-term track record. In addition, Unicorn is a substantial AIM investor. This could help the management team gain access to high-quality deal flow to support the deployment of funds raised in this offer.

Investors should note the VCT lacks a strict share buyback policy. By not targeting a specific discount to NAV, the trust trades at an unusually large discount to its net asset value. 

How to invest

Unicorn AIM VCT has not yet announced fundraising plans for 2020/21. As soon as further information is available, we will update this page.

In the meantime please register your interest here to be notified as soon as VCT offers open. 

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
AIM
Target dividend
-
Initial charge
-
Initial saving via Wealth Club
-
Net initial charge
-
Annual rebate
-
Funds raised / sought
-
Deadline
CLOSED
Last updated: 11 February 2021

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