Unicorn AIM VCT

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Please note, as at 9 February 2022 the offer has now reached capacity and is closed. 

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Previous offer review

Below is our review of the previous offer, which closed in February 2021. As an when a new offer will open, the review on this page will be updated.

Unicorn AIM VCT is the largest AIM VCT and the second largest of all VCTs, with net assets of £355.3 million (December 2021). 

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 20.9% of the total net assets of the trust. 

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. Over 10 years it is the top-performing AIM VCT, delivering a total return of 286.3% (December 2021) – please note, past performance is not a guide to the future.

The VCT aims to raise a total of £25 million. This is a small offer, so could fill quickly. Note: existing shareholders will have priority until 8 February 2022 (5.30pm). Please note: as at 7 February (9.30am) the VCT has stopped accepting applications from new investors. 

Breakdown by investor type Sum of applications received
Existing investors £11.9m
New investors £12.5m
As at 4 February 2022 (5:00pm). Data is provided by the offer promoter and is the latest available.

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 then apply

Highlights

  • Largest AIM-focused VCT – £355.3 million net assets under management (December 2021) 
  • Established portfolio of over 95 companies 
  • History of steady dividend payments, a total of 35.25p in the last five years
  • Best-performing VCT over 10 years to December 2021 (performance not a guide to future) 
  • Run by Chris Hutchinson, a very experienced AIM manager, supported by a highly regarded team of fund managers
  • Available in the current tax year (2021/22) only
  • Minimum investment £3,000, you can apply online

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 20 years’ experience running portfolios of smaller-company stocks. Alongside this VCT, Mr Hutchinson is also the lead manager of the highly regarded Unicorn Outstanding British Companies Fund (an OEIC). Chris is supported by a further four UK equity fund managers. Collectively, the team is responsible for managing Unicorn’s suite of investment funds as well as its AIM IHT service. 

The wider Unicorn team has recently added an Operations Director and expects to add two further investment analysts, including an ESG specialist, in the near future.

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 £500 million is invested in AIM-quoted companies. The wider fund group allows the manager to continue supporting businesses when they are no longer VCT eligible, potentially making Unicorn AIM VCT attractive as a partner to investee companies. 

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

In the past, the manager has also invested a smaller proportion of the fund in unquoted smaller companies.

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 35.25p and ranged from 6.25p to 9.25p per share per annum – past performance is not a guide to the future. In November 2021 the fund announced its first-ever special dividend, of 7.0p per share (investors in the current offer will not be eligible). The manager will consider making further special distributions in the event of future large disposals. 

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

Covid-19 impact

At the onset of the pandemic, the VCT 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 provided unprecedented support to their economies. The VCT has since seen its net asset value rise to 239.2p (December 2021) having paid out 9.5p in dividends since March 2020. Past performance is not a guide to the future.

Unicorn believes this strong performance is due to the trust’s exposure to several 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. 

Current portfolio overview

As of 31 December 2021, the Unicorn AIM VCT portfolio contained more than 95 companies. The portfolio is concentrated within its top 10 holdings, which account for 49.6% of total assets. The trust’s two largest positions, Interactive Investor and Hasgrove, both unquoted, accounted for 20.9% of total assets. 

Since October 2021, asset management group abrdn has agreed to acquire Interactive Investor for £1.5 billion and complete the deal in the second quarter of 2022, subject to approval from regulators and shareholders. The deal has led to a significant increase in the value of Unicorn’s Interactive Investor stake. 

The current portfolio is spread across diverse sectors, with a bias towards biotechnology and software businesses. The average market capitalisation of holdings within the portfolio is £186.9 million.

Portfolio breakdown by asset type (%)

Source: Unicorn Asset Management, as at December 2021.

Portfolio breakdown by sector type (%)

Source: Unicorn Asset Management, top 10 sectors as at December 2021.

In its last financial year to September 2021, the VCT invested £29.5 million. That includes £25.5 million of investments into 12 new companies, and £4 million of follow-on investments into Microsaic Systems Surface Transforms, The British Honey Company, VE Education Holdings and Ilika. 

In that period, two portfolio companies received takeover offers, Augean and Wey Education. The £4.6 million Wey Education proceeds together with several partial disposals resulted in overall disposal proceeds of £16.3 million and capital gains over the life of the investments of £10.9 million. In December, the VCT’s largest holding, Interactive Investor, received a takeover offer, detailed below. 

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 13.8% 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 holding rose by 315% between September 2017 and September 2019. 

2020 proved another major catalyst for the business: it acquired The Share Centre, saw its revenues rise by 63% and its active customer numbers rise by 154%. That trend continued into the first half of 2021, with revenues up 12%. Between September 2019 and December 2021 the value of the holding rose by a further 243%.

In December 2021 asset management giant abrdn announced plans to acquire the company for £1.49 billion. This is subject to regulatory and shareholder approval, however, if successful the value of Unicorn’s holding in the company would rise from the £49.1 million logged in December 2021 to £54.5 million – not guaranteed. 

In the event of completion, Unicorn expects to distribute some of the proceeds to existing shareholders as a special dividend, with the remainder reinvested or held as cash.

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 £217.1 million in FY 2017 to £297.7 million in FY 2021. The business has a market capitalisation of £2.9 billion (January 2022). 

The VCT first invested in Abcam in 2005 and the holding is currently worth £20.3 million (December 2021), 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: it is its largest AIM-quoted holding and the third-largest overall.

Saietta Group – Unicorn AIM VCTSaietta Group – recent AIM-quoted investment 

Saietta Group is an engineering business specialising in motors for a wide range of electric vehicles. Unlike conventional electric motors, which are cylindrical in shape, Saietta’s motor has a disc-like shape so it can fit inside each wheel rim, leading to a more efficient transfer of power. Saietta aims to transform the light motorbike market in Asia, where the business is in discussions with leading motorbike manufacturers. In India alone, 20 million heavily polluting light motorbikes are sold every year. 

The Oxfordshire-based company was admitted to AIM in July 2021, raising £37.5 million to establish a motor durability testing facility and pilot production facility with the goal of manufacturing 100,000 units per annum within three years.

Results covering the company’s first six months as a quoted business saw revenues rise from £56,000 in 2020 to £795,000 in 2021. That follows the commercial launch of the company’s first motor, the AFT140  which is aimed at mid-power motorbikes and final-mile delivery vehicles. The company has since launched its first marine motors, which are expected to underpin sales growth in the near term.

Unicorn invested £3.2 million as part of the IPO and has enjoyed a substantial gain with the share price more than doubling since listing – past performance is not a 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. 

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 healthcare and technology holdings as well as from its two unquoted holdings, the VCT has more than fully recovered. The VCT finished 2021 with a NAV per share of 239.2p after paying 9.5p in dividends since March 2020. 

Over the ten years to December 2021, Unicorn AIM VCT has produced a NAV total return of 286.3%. Over the last five years, it has paid total dividends of 35.25p per share and has grown its net asset value by 79p to 239.4p (31 December 2021). Past performance is not a guide to the future; dividends are variable and not guaranteed.

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

Source: Morningstar. Performance figures are calculated net of fees, on a NAV to NAV basis. Past performance is no guide to the future. Dividends are variable and not guaranteed. The bar chart shows net asset value and cumulative divi-dends per share for the period 31/12/2016 - 31/12/2021.

Dividends paid per 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 December 2021.

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. 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.

The valuation of the sizeable Interactive Investor position is dependent on the company being successfully acquired by abrdn. This deal is still subject to regulatory approval, so there can be no certainty it will complete in the timeframe expected or at all.

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, offer price and share allotment calculation methodology.

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%
Existing shareholder discount
Net initial charge through Wealth Club (new investors) 2.5%
Net initial charge through Wealth Club (existing shareholders) 2.5%
Annual management charge 2%
Annual administration charge See below
Performance fee
Annual rebate from Wealth Club (for three years) 0.10%

More detail on the charges

Deadlines

  • Existing investor priority period ends 8 February 2022 (5:30pm)
  • Closing date for applications is 31 March 2022, or once £25 million has been raised

Dividend Reinvestment Scheme

There is a Dividend Reinvestment Scheme that allows shareholders to reinvest future cash dividend payments in new shares if desired. 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 2021 £6.3 million of shares were bought back, with discounts ranging from 12.9% to 14.7%. 

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 2021, the trust’s discount to NAV was 12.6%. 

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

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 a discount.

The charts show the five-year discount to net asset value history of the Unicorn AIM VCT 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.

Five-year average discount to NAV history

Source: Morningstar, 31 December 2021. Discount is 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 VCT 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 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

Unicorn is a highly regarded fund management business that 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 several 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.

Unicorn AIM VCT has been the top-performing AIM VCT over the 10 years to December 2021, with a NAV Total return of 286.3%, although past performance is not a guide to the future. Its bias towards technology, healthcare and biotech sectors has helped it navigate the volatility in the AIM market during the pandemic, as businesses within those sectors found favour with investors. 

The VCT’s performance has been further enhanced by strong performance from Interactive Investor and Hasgrove – both unquoted investments, together accounting for 20.9% of the trust’s net assets. The planned acquisition of Interactive Investor by abrdn should free up cash, helping improve liquidity and potentially fund additional special dividends. However, it also means management will be looking to make significant new investments as it looks to deploy sale proceeds, and the deal itself remains subject to regulatory approval.

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 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 and can trade at a large discount to its net asset value. 

Read important documents and then apply

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
£25.0 million / £25.0 million
Deadline
CLOSED
Last updated: 9 February 2022

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