Puma VCT 13

Deadline: 5 Apr 2018

Here is one VCT that is definitely not looking for the next Facebook. Puma VCT 13 is a limited life VCT that aims to wind up and distribute income and capital to shareholders after eight to ten years. It is raising up to £30 million. 

Highlights

  • Limited life VCT with an eight to ten year expected timeframe
  • Emphasis on limiting downside risk rather than stellar investment returns
  • 8-15 qualifying companies expected in the portfolio
  • Sector agnostic
  • Targets an average dividend equivalent to 5p per annum from 2020 onwards (not guaranteed).
  • Minimum investment £5,000

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The manager

The Puma VCTs are managed by Puma Investments, a highly experienced limited-life VCT manager. This is the thirteenth Puma Limited Life VCT. The previous twelve VCTs in the series raised £223 million.

Like previous Puma VCTs, Puma VCT 13 will aim to invest in companies with assets or contracted revenue streams, to enable the VCT to be wound up after a certain period of time. It will also seek to invest in growth businesses with strong management teams. It is considered a lower risk VCT as a result, compared to its generalist VCT peers. However, remember it still invests in unquoted and small companies so your capital is at risk: you should not invest money you cannot afford to lose. 

Strategy

The Puma 13 VCT will aim to invest in businesses with assets such as freehold property or stock. This means that should the underlying firms not perform as anticipated, the VCT has some security over the assets which can be realised to provide value for investors. Investments will be structured in the form of ordinary equity together with loans secured against the company’s assets. 

The Puma 13 VCTis sector agnostic. It typically avoids start up and early stage investments, as well as high-growth but high-risk areas such as biotech. The investment team look for well-managed, established, unquoted companies which or are expected to be revenue generating with limited external debt. Puma has a strong pipeline of new deals, thanks to the difficulties SMEs continue to face raising money from traditional banks.

The VCT is expected to hold 8-15 qualifying companies, dependent upon the level of funds raised.

Funds will be invested in qualifying deals over time. Pending investment, the managers may invest funds in a range of non-qualifying investments. These will include cash, money market funds and listed debt and listed equities.

Examples of portfolio companies held by previous Puma VCTs

Brewhouse & Kitchen

Puma 13 VCT - Brewhouse and KitchenPuma previously made a £3.1 million investment into a micro-brewery pub business to support the roll-out of the brand across the UK (in December 2012). The Brewhouse & Kitchen (B&K) business has continued to expand and is currently running the concept at 16 locations. B&K branded pubs brew a significant volume of their own beer on site, which acts as a unique selling point as well as boosting margin through the lower duty levied on small scale beer production. The investments were secured with a first ranking charge against the company’s assets. The transaction completed successfully and the Puma VCTs exited in full in October 2015. 

Growing Fingers Limited

Puma made a £2.8 million investment into an owner and operator of children’s day nurseries. The investment will facilitate the development and initial trading of the company’s first site: a modern, purpose built nursery in Wendover, near Aylesbury, for up to 108 children aged 0 to 5 years old. The management team has significant experience, having operated in the nursery sector since 2002, and intend to develop further new nurseries in due course. The investment is secured with a first ranking charge against the company’s assets. 

Target returns

There is a target dividend of 5p per share, payable from 2020. Puma will aim to ensure the VCT can be wound up and the remaining capital and income returned to investors after eight to ten years from the closing date of the offer, although there is no guarantee of this. 

Risks

Please remember your capital is at risk. VCTs are high risk investments and are not suitable for everyone. Investors should not invest money they cannot afford to lose. 

The risks and investment objectives are different with each VCT, but with a significant proportion of the combined portfolios invested in asset-backed deals, investors are highly exposed to commercial property.

Tax rules can change and tax benefits depend on individual circumstances.

Venture capital schemes have been the subject of a Treasury consultation. The proposals could have an effect on the investment policy of this VCT in future.

Fees

The initial charge is 3% before Wealth Club discount. The annual management fee is 2%, with an additional 0.35% each year in administration fees. The annual cap on running costs is 3.5%. The manager is entitled to receive deal completion and monitoring fees. In addition, the manager will receive 20% of any distributions over £1.05 as a performance fee.

Our view

The Puma 13 VCT won’t deliver stellar returns – indeed, it’s not designed to. It is structured to enable the VCT to be wound up after eight to ten years, with the remaining funds returned to investors. The initial tax break forms the majority of the return, and the underlying investments will typically have a level of asset backing, such as freehold property or contracted revenue, to mitigate downside risk. The Puma team is very experienced in this style of VCT management. If you’re interested in a limited life VCT this is one to consider. 


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. 16.01.2018

The details

Type
Limited Life
Target dividend
5p per share from year two
Initial charge
3.0%
Initial saving via Wealth Club
1.0%
Net initial charge
2.0%
Annual rebate
 
Funds raised / sought
£3 million / £30 million
Deadline
5 Apr 2018

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