Draper Esprit VCT

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Draper Esprit VCT – formerly Elderstreet VCT – is a generalist VCT that will invest in unquoted technology investments, alongside its existing established portfolio which includes some AIM listed companies. A new share offer aiming to raise approximately £7 million is now open.

Highlights

  • Established VCT which will now focus on unquoted technology investments
  • The existing portfolio provides some exposure to AIM
  • Elderstreet’s merger with Draper Esprit adds weight and expertise
  • Target dividend of 3p per share – variable and not guaranteed
  • Minimum investment £6,000

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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.


The manager

The VCT, which was founded in 1998 and was previously known as Elderstreet VCT, is run by Elderstreet Investments.

In 2016 Elderstreet signed an agreement with Draper Esprit plc, an AIM-listed venture capital group. The VCT was renamed the Draper Esprit VCT in January 2019.

Draper Esprit plc has over £330 million invested across its various funds. It focuses largely on knowledge intensive, early and growth stage technology companies.

Watch a video interview with fund manager William Horlick:

Recorded 29 January 2019

Investment strategy

The Draper Esprit VCT has unaudited net assets of £41.6 million and a portfolio of 24 trading companies (as at 30 September 2018).

The current portfolio is spread across a wide variety of sectors: from property to logistics and from gas utilities to the manufacture of sports ammunition. Indeed, one of the largest holdings is Lyalvale Express, a producer of shotgun ammunition in the UK. 

Future investments will be made in unquoted technology investments, in line with the Draper Esprit investment ethos. The VCT should be able to take advantage of the deal flow and management experience afforded by other Draper Esprit funds, as well as access to companies requiring funds in excess of $10m.

Since building its association with Draper Esprit, the VCT has committed to fourteen new technology investments totalling £11.25 million since April 2017. Twelve of these deals have completed and two are subject to HMRC approval (as at January 2019).

A recent example of a Draper Esprit portfolio company – although not one held within the VCT – is Graphcore, a Bristol based silicon chipmaker developing AI processors. The Draper Esprit plc and EIS funds had invested into Graphcore in 2016. In December 2018, Graphcore gained ‘unicorn’ status when it closed a $200 million funding round with a valuation above $1.5 billion. Please note that past performance is not a guide to the future.

Other investors into Graphcore included Sequoia Capital, Atomico, Amadeus Capital, Robert Bosch Ventures, C4 Ventures, Dell Technologies Capital, Foundation Capital, and AI experts such as Demis Hassabis (co-founder of DeepMind) as an angel investor.

Portfolio

The current portfolio is divided into legacy holdings, Draper Esprit technology investments and cash which will be invested in further technology investments.

Four holdings account for 91% of the legacy portfolio, split between two AIM companies and two private engineering and manufacturing businesses. 

Source: Draper Esprit, as at 11 January 2019.

Dividends and performance

The dividend target for the fund is 3p per annum. Over the last five years the VCT has paid an average of 7.7p, however, this includes special dividends of 19p paid in 2014. Past performance is not a guide to the future.

Future dividends are expected to be funded from portfolio exits rather than loan interest income. 

Source: Draper Esprit. Past performance is not a guide to the future. Dividends are variable and not guaranteed. Dividends paid per year, as at October 2018.

Source: Draper Esprit. Past performance is not a guide to the future. Dividends are variable and not guaranteed. The chart shows Net Asset Value and cumulative dividends paid to 31 December each year, excluding 2017 and 2018.

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.

Fees and charges

A summary of the fees and charges is shown below. The net initial charge shown includes the Wealth Club discount.

Full initial charge 5.5%
Wealth Club initial saving 2.5%
Net initial charge through Wealth Club 3%
Annual charge 2%
Performance fee 20%

More detail on the charges

Share buybacks

From time to time the VCT may buy back their own shares through the market. From 1 April 2019 it aims to maintain a mid-share price discount of approximately 5% to NAV (previously 7.5%). However, there is no guarantee that the VCTs will buy back shares and the discount to NAV could be greater or less than this. 

Our view

Draper Esprit’s experience and expertise in unquoted technology investments is without doubt. The merger of Elderstreet with Draper Esprit could help reinvigorate the VCT portfolio, although there are no guarantees. 

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
£7.0 million / £7.0 million
Deadline
CLOSED
Last updated: 8 April 2019

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