Downing ONE VCT

Downing ONE VCT has announced a £20 million top-up offer for subscription, with up to £10 million over-allotment facility. The Downing ONE VCT holds a mix of growth and income-producing investments, split around 40:60. The growth portfolio includes many AIM-listed companies. The income portfolio is entirely in unquoted companies, many of which are asset-backed. 

Highlights

  • Well-diversified VCT with around 80 investments
  • Experienced and well-resourced team
  • Backs talented entrepreneurs and management teams
  • Aims to provide income alongside capital growth
  • Target dividend of 4% of Net Asset Value per annum (not guaranteed)
  • Minimum investment £5,000
  • Also offers an monthly saving option (£500 minimum)

The manager

Downing LLP is a well-established manager of venture capital and EIS funds. It has three main strands to its business: quoted equity and unquoted equity. The unquoted side is then split between asset-backed and renewable investments.   

Downing currently manage over £1.7 billion of assets. 

The offer

61% of the Downing ONE VCT portfolio is income-focussed (of which all are unquoted businesses).

39% of the portfolio is in growth-focussed investments, including many AIM-listed companies. 

The portfolio holds a range of businesses including hotels, wedding venues and care homes. 

Target return

There is a target to pay dividends of at least 4% of Net Asset Value (NAV) per annum. The asset-backed businesses are primarily structured to generate income. Dividends are variable and not guaranteed. 

Exit strategy

Due to the higher proportion of AIM-listed businesses, the Downing ONE VCT arguably has more liquidity than most generalist VCTs, although like all VCTs it should be considered an illiquid and long term investment.

Exits within the portfolio have been fruitful over the last few years, largely down to a better banking environment, according to Downing. There has been a mix of trade buyers and management teams refinancing to purchase businesses. 

Risks

Due to the large percentage of assets held in AIM listed companies, the Net Asset Value of the VCT may be more volatile than other generalist ones. 

The usual risks with smaller companies exist with this VCT offer. For instance, VCT investments are illiquid and capital is at risk. Investors should not invest money they cannot afford to lose. 

The value of tax relief will depend on the circumstances of the individual investor and tax rules could change in future. 

Fees

There is an initial charge of 4% before Wealth Club discount. Annual costs are capped at 2.75%. Similar to most managers, Downing may receive arrangement fees and monitoring fees from investee companies, capped at 2% and 0.5% respectively.

Downing receives no performance fee – an unusual and welcome move in the VCT industry.

Early bird savings are available:

  • 1% saving on the initial charge until 31 October 2017 (3pm)
  • 0.5% saving on the initial charge until 28 February 2018 (3pm)

Summary

This is a well-diversified VCT with about 80 holdings split across AIM companies, asset-backed investments and growth opportunities.  There is no performance fee, which will be a welcome change for many. Consistent growth and attractive dividends are the aim, but of course there are no guarantees. 

Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based 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. 08.09.17

The details

Targeted Dividend
4%
Initial Charge
4.0%
Minimum Investment
£5,000
Sector
Generalist
Deadline
31 Oct 2017 for early bird saving
WealthClub Saving
3.25%

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