ProVen VCTs

Offer update

  • ProVen Growth & Income VCT remains open and has £4.3 million capacity remaining (10 Sep 2019).
  • ProVen VCT has raised £40 million and is closed (30 Apr 2019).

The ProVen VCTs have long specialised in growth capital investments, unlike many other established VCTs which previously had a focus on replacement capital deals. They have achieved a number of high-profile exits over the years, including 10, of which six profitable, in the 12 months to February 2019. Please remember though past performance is not a guide to the future – see annual performance below. 

Highlights

  • The two VCTs have combined assets of £185 million (Feb 2019)
  • Focus on growth capital since inception
  • Diverse portfolio of mature investments
  • Impressive track record to date with combined realised gains of £45.2 million in the 12 months to February 2019
  • Experienced management team
  • 0.10% annual rebate for three years when you invest through Wealth Club
  • Minimum investment £5,000 – you can apply online

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 apply

The manager

Beringea LLP has managed the ProVen VCTs since inception. It is an award-winning, specialist venture capital firm which manages around £185 million of VCT assets. It is part of an international fund management group with more than $450 million of venture capital assets under management and a strong investment track record spanning 25 years.

It has investment teams in both the United States and the UK so can offer an international perspective.

The VCTs are directly managed by a team of eleven. This includes Founding Partner Malcolm Moss, Managing Partner Stuart Veale and Chief Investment Officer Karen McCormick, alongside two investment directors – Maria Wagner and Eyal Malinger.

Watch an exclusive video interview with Chief Investment Officer, Karen McCormick:

This interview was filmed in November 2018. Investments in the portfolio may have changed since then. For instance, the ProVen VCTs have since realised their investment in Chess Dynamics, mentioned in this video.

Investment strategy

Established in 2000 and 2001, the ProVen VCTs are almost twenty years old. ProVen VCT (“PVN”) is the elder of the two and has been a generalist fund since its inception, whilst ProVen Growth & Income VCT (“PGI”) initially focused on the media sector (this changed in 2006).

Over the years, the funds have progressively converged towards identical investment mandates and Beringea has been steadily working on rebalancing the two portfolios. Today, they're both generalist VCTs which mirror each other, with no companies held exclusively by just one VCT. However, each VCT invests different amounts in each deal.

Unlike many VCTs of the same vintage, the ProVen VCTs have always focused on growth capital investments rather than management buyouts.

This means the new VCT rules have had little or no impact on strategy. It also means the ProVen VCTs have one of the longest track records of any VCTs in growth investing.

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

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

Exit track record

In the 12 months to February 2019, the ProVen VCTs have had some of the best returns in their history. They have exited 10 investments, six of which profitably, including Watchfinder, Chargemaster, Think and Chess. The acquisition of Watchfinder realised a gain of £21 million for the ProVen VCT, the largest gain achieved on a single disposal in the history of the VCT. Past performance is not a guide to the future. 

Watchfinder – ProVen VCTsWatchfinder

Founded in 2002, Watchfinder was one of the first online platforms for watch 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 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.

Chargemaster – ProVen VCTsChargemaster

As electric cars have become more mainstream, the demand for charging points has soared. David Martell, a car aficionado, spotted this and established Chargemaster to develop accessible and affordable infrastructure for electric vehicles.

The business has two key revenue streams: nationwide public charging networks and the manufacture and installation of household units.

By 2018, over 45,000 homes were fitted with Chargemaster equipment – more than double the number of users at the point of Beringea’s first investment in 2014. The number of public charging points also significantly expanded from 3,000 units in 2014 to 6,500 today.

Chargemaster is now the UK’s leading operator and provider of electric vehicle charging infrastructure. The ProVen VCTs realised their stake in the company earlier this year through an industry sale to BP, producing a return of 3.5x for the VCTs.

MEL Topco Limited (trading as Maplin)

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 had 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. Moreover, after the company went into administration, Beringea had priority over the equity investor and received distributions from the administrator. Ms McCormick estimates by the end of the process Beringea will probably lose about £1 million of the £5 million invested. It could be higher or lower than this.

Portfolio

The VCTs' portfolios each include 42 companies (Feb 2019). After the recent exits, a good proportion of these are still mature companies with the potential for exits in the next few years although this is not guaranteed.

Beringea will consider most sectors although it no longer pursues investments in advertising technology or in the casual dining sector due to the current market conditions. Instead, it has continued to diversify the VCTs’ portfolios to help mitigate sector-specific issues and broader economic uncertainty. 

Beringea anticipates future deal flow to be particularly strong due to a combination of economic circumstances and its own proactive deal sourcing. Competition within the market for the best deals is undeniably strong and as a consequence the managers believe some company valuations have been inflated. However, Beringea is confident in its ability to identify good deals and execute them without veering from its valuation principles.

Indeed, in the 12 months to February 2019, ProVen VCT invested £23.5 million (£14 million in five new portfolio companies and £9.5 million in ten existing portfolio companies); ProVen Growth & Income VCT invested £9.9 million (£5.5 million in five new portfolio companies and £4.4 million in ten existing portfolio companies).

The current portfolio breakdowns are shown below (Feb 2019). 

Source: Beringea. As at 29 February 2019.

Example portfolio companies

My1stYears – ProVen VCTsInfinity Reliance Ltd (trading as My 1st Years)

My 1st Years provides personalised gifts for young children – from clothing to toys and furniture. Founded in 2009, the company was created when the founders struggled to buy a gift for a friend’s daughter. They ended up making a personalised pair of baby shoes. They were a hit with their friends with many requesting some for their own kids. 

Today, My 1st Years has been endorsed by a number of celebrities, from Elton John to Dannii Minogue. Its most famous customer is probably HRH Prince George, who wore one of its personalised dressing gowns when meeting President Obama.

The company sells directly through its website, as well as through online marketplace notonthehighstreet.com and department stores such as Harrods, John Lewis and Selfridges.

My 1st Years previously secured £2 million in funding from individuals, including Lord David Alliance, co-founder of Coats Viyella. In December 2016 Beringea invested £4 million alongside £1 million from Hargreave Hale. In the last 12 months Beringea invested a further £3.6 million to enable the company to continue its expansion into the US. 

My 1st Years is the largest holding in PVN and the fifth largest in PGI.

Monica Vinader - ProVen VCTsMonica Vinader

Monica Vinader creates contemporary designer jewellery. Managed by sisters Monica and Gabriela, the business offers a diverse range of personalisable pieces, created with high-quality materials and semiprecious responsibly sourced gemstones.

Awarded Brand of the Year at the 2009 UK Jewellery Awards, the company has continued to demonstrate its global appeal with an extensive client list including Kate Winslet, Cameron Diaz, Keira Knightley and the Duchess of Cambridge.

Currently, its products are available online as well as through retail partners such as Selfridges, Liberty and Harrods in the UK and Nordstrom in the US and Canada. In addition, the company is in the process of expanding its distribution and has recently launched boutiques in UAE, Hong Kong, Singapore and South Korea.

The ProVen VCTs invested in 2010 to fund the company’s first branded shop in Mayfair and to develop the supply chain. A follow-on investment of £1.1 million was made in 2013 to accelerate growth.

In 2016, Beringea sold 60% of its original stake to consumer specialists Piper and Winona Capital. The sale generated a return of 12x the cost of the original 2010 investment. The two VCTs still own an equity stake in the company.

Monica Vinader is currently the eighth largest holding in PVN and the twentyfirst in PGI. In the latest annual reports (Feb 2019) the valuation was decreased, due to slower than expected trading during the festive period.

Aistemos - ProVen VCTsAistemos (recent investment)

In July 2018 the ProVen VCTs invested £3 million in Aistemos, the leading provider of patent analytics software.

There are over 100 million patents in the world, registered in more than 100 patent offices and owned by over 1 million different organisations. The information they contain could be immensely valuable to organisations, but until recently expensive and time-consuming to access.

To address this, intellectual property expert and former advisor to the UK government Nigel Swycher created Cipher, Aistemos’s key product. Cipher uses artificial intelligence and machine learning to enable any person in any business to analyse intellectual property at scale and speed. 

Companies as diverse as BAE Systems, ARM and Ocado use Cipher, as well as a roster of international law firms, investors and academic institutions.

Beringea’s investment will be used mainly to develop products tailored to specific industries.

Dividends and performance

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 (note this shows dividends paid in the calendar year, not per VCT year-end).

PVN and PGI have achieved an average annual dividend of 10.6p and 7.04p respectively over six years. However, please note, past performance is not a guide to the future, dividends are variable and not guaranteed. 


Source: Beringea. Past performance is not a guide to the future. Dividends are not guaranteed.
Source: Beringea. Net Asset Value and cumulative dividends paid to 28 Feb each year. Past performance is not a guide to the future. Dividends are not guaranteed.

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.

Both VCTs hold a significant proportion of their portfolios in just five companies, as at August 2018 (38.7% for ProVen and 36% for PGI). The performance of these companies will have a magnified effect on the overall performance of the VCTs.

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%
Early bird discount
Wealth Club initial saving 3.0%
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 £115k (Feb 18 - Feb 19)
Performance fee 20%
Annual rebate from Wealth Club (for three years) 0.10%

More detail on the charges

Deadlines

ProVen VCT is now fully subscribed. ProVen Growth & Income VCT remains open. The extended closing date is 10 January 2020 unless fully subscribed earlier.

Dividend Reinvestment Scheme

The company operates a dividend reinvestment scheme which enables shareholders to reinvest any future cash dividends in Ordinary shares. 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

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% of 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%. 

Our view

The managers of the ProVen VCTs have probably the longest track record in growth capital investment of any VCT. They have been very successful at it, achieving an impressive number of profitable exits over the years – four in the latter half of 2018 alone, although past performance is not a guide to the future.

Unlike the managers of many VCTs of the same vintage, Beringea did not need to adjust its strategy to adapt to new VCT rules. On the contrary, the new rules play to its strengths.

In our view, this is one of the strongest offers currently available from a highly credible management team.

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
5% of NAV
Initial charge
5.5%
Initial saving via Wealth Club
3.0%
Net initial charge
2.5%
Annual rebate
0.10%
Funds raised / sought
£75.7 million / £80.0 million
Deadline
10 Jan 2020
Last updated: 31 May 2019

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