Unicorn AIM VCT

Update (2 April 2019): Offers now closed

Applications for the full £25 million (including overallotment) have now been received.

See VCT offers with capacity still available


Unicorn AIM VCT – the largest AIM focused VCT – is managed by Chris Hutchinson of Unicorn Asset Management. It is raising up to £15 million, with a £10 million overallotment facility.

Highlights

  • Largest AIM-focused VCT – £165.6 million net assets under management (31 Dec 2018)
  • Established portfolio of over 100 companies, around 80 VCT qualifying 
  • History of steady dividend payments, nearly £60 million paid out since launch – dividends are variable and not guaranteed, and past performance not a guide to the future
  • Has shown resilience through market wobbles
  • Run by Chris Hutchinson, a very experienced AIM manager
  • Unicorn has over £1 billion of assets under management across its funds, and £313 million invested in AIM
  • Minimum investment £2,000, 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.

The manager

Unicorn Asset Management (“Unicorn”) is a specialist fund manager with a bias towards smaller companies. Chris Hutchinson is the senior fund manager and has 18 years’ experience in 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.

Unicorn is an independently owned and managed investment company. Around 60% of the company’s equity is owned by the directors, managers and family members. It has approximately £1 billion under management, of which £313 million is invested in AIM-listed companies.

In March 2010, the Unicorn AIM VCT merged with the Unicorn AIM VCT II (along with five share classes) to produce a single share class. The VCT also acquired the assets and liabilities of the Rensburg AIM VCT in 2016 which added £11.5 million to the VCT’s portfolio. 

Investment strategy

The Unicorn AIM VCT seeks largely AIM-listed 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

Mr Hutchinson aims to identify companies where management owns a significant stake in the business and has a demonstrable track record of making money for shareholders. He is a firm believer that if 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.

In Mr Hutchinson’s words: “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.” 

This approach is behind the existing portfolio of more than 100 companies – around 80 of which are VCT qualifying – across a number of sectors. The companies have an average market capitalisation of £92.6 million. Approximately 40% of them are forecasting a dividend in the next 12 months. Out of the top 10 holdings, which represent around 40% of the portfolio, nine companies are profitable and pay dividends already. 

The AIM market has been turbulent of late and the VCT has been affected as investors might expect. In the final quarter of 2018 the VCT’s NAV was down by 17.5%. It may be a bumpy ride, but the VCT’s managers are confident about the future. More realistic pricing from the global share sell off, for instance, is likely to bring investment opportunities for the VCT.

There is no specific dividend target, however, the VCT intends to maintain “a steady flow of dividend distributions”. 

The non-qualifying portion of the portfolio will be invested in a mixture of cash, fully listed blue-chip shares and the range of OEICs that Unicorn manages.

Examples of portfolio companies

Abcam – Unicorn AIM VCTAbcam – largest holding

Jonathan Milner, Abcam's co-founder, was a postdoctoral researcher at Cambridge University. His research project had slowed because of problems finding antibody reagents with accurate and up-to-date information on uses and limitations. So, in 1998 he remortgaged his home to create Abcam with David Cleevely and Professor Tony Kouzarides and simplify the way scientists can buy antibodies – a sort of "Amazon for antibodies". 

At the start Mr Milner would go round the University of Cambridge laboratories with an ice bucket full of antibodies selling to fellow scientists, in an effort to generate enough funds to keep the company afloat. 

Nearly twenty years later, Abcam is the leading brand for research antibodies. 64% of global researchers use Abcam products . The company, which listed on AIM in 2005 raising £15 million, is now worth over £2.5 billion. It has over 1000 staff across its offices and labs in 12 global locations. In the last financial year (to June 2018) it reported revenues of £233.2 million and adjusted profit before tax of £69.1 million . Abcam has been paying – and growing – dividends for over 10 years.

The team invested £1.5 million across the two Unicorn VCTs in 2005. Unicorn was the only institutional investor at the time. 

Abcam would not qualify for new investment these days, however the VCT can retain the company as long as it is listed on AIM which Mr Hutchinson believes it is likely to do. 

Abcam represented 8.6% of the VCT’s portfolio as at 31 December 2018.

Creo Medical - Unicorn AIM VCTCreo Medical Group (recent investment)

Wales-based Creo Medical uses patented technology to produce surgical endoscopy devices, now in the pre-commercialisation phase. 

Creo Medical’s flagship product is Speedboat RS2, a device for the endoscopic removal of cancerous and pre-cancerous lesions in the bowel. Surgery – the treatment traditionally used to remove these lesions – might require three to four hours of treatment under general anaesthetic, a hospital stay of around five days and could result in changes to the patient’s lifestyle (e.g. the need for a colostomy bag). Speedboat RS2 could remove the same lesion in 20 minutes, without the main risks associated with surgery. 

45 clinicians have been trained so far and patients have been successfully treated in the UK, South Africa and Mainland Europe. Creo Medical stated it is on track for full commercial launch in 2019. 

Unicorn AIM VCT invested £1 million in August 2018. 

Crawshaw Group

As can be expected, not all investments work out. One of the most recent examples is Crawshaw Group, the butchers. It was founded in Yorkshire in 1954 and had built up a chain of stores across the Midlands and North of England. 

Crawshaw Group specialised in prepacked sausages, chops and similar cuts of meat, alongside cooked chickens and ready meals that people could pick up on the way home from work. Many of the butcher shops were close to or in indoor markets, and the meat was 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 was not immune to the problems facing British high street businesses of late. In the six months to July 2018, the company posted a loss before tax of £1.7 million. The Group blamed tough market conditions and having "too many high street stores and not enough factory stores". In October 2018, the firm went into administration.

The Unicorn AIM VCT invested at a book cost of £1.5 million in 2007 – the holding has now been written down to nil value.

Performance

In the last five financial years, the VCT has paid dividends per share of over 6p each year. Note past performance is not a guide to the future and dividends are variable and not guaranteed. The dividend history is shown below.

Source: Unicorn Asset Management. Dividends paid for the financial years ended 30 Sep 2010 to 30 Sep 2018. 2018 includes a final dividend of 3.5p proposed for the Financial Year ended 30 Sep 2018 to be paid on 1 Feb 2019. Dividends are not guarantees and past performance is not a guide to the future.
Source: Unicorn Asset Management. Past performance is not a guide to the future. Dividends are variable and not guaranteed.
Source: Unicorn Asset Management. Past performance is not a guide to the future. Total return of the VCT shows net asset value and cumulative dividends to 31 December 2018. Dividends are variable and 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.

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.

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. 

Fees and charges

A summary of the fees and charges is shown below; the net initial charge includes our discount. Please see the provider documents, including the key information document, for full details.

Full initial charge 5.5%
Wealth Club initial saving 3%
Net initial charge through Wealth Club 2.5%
Annual management charge 2%
Annual rebate (for three years) 0.10%
Performance fee None

More detail on the charges

Dividend re-investment

The company does not have a dividend re-investment scheme in place. 

Share buy-backs

The VCT operates a share buy-back facility at a discount to net asset value. This is subject to availability and Board and shareholder approval. Please see the offer documents for details.

Deadlines 

The following deadlines apply, unless the offer is fully subscribed prior to this date: 

  • For allotment this tax year, applications and cleared funds must be received by 5.30pm on 4 April 2019.

Annual rebate when you invest through Wealth Club

The Unicorn AIM 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 0.10% of the Net Asset Value of the Offer Shares issued to you when you invest. Terms and conditions apply.

Our view

Being the biggest doesn’t always mean being the best. However in our view, as well as being the biggest AIM VCT, Unicorn is a top-quality offer. Its size ensures access to the best new deals coming to the market and the long-term approach of Chris Hutchinson and his team should give investee companies the assurance they are not investing for short term profit. Indeed, as Unicorn has a fund range that also invests considerably in AIM listed companies, management teams have the comfort of knowing that Unicorn has the ability to fund growth in their business for the long term. 

This VCT comes highly commended. The lack of performance fee is also positive, as is the reduction in the annual charge cap from September 2019.

A frequently asked question: Do AIM VCTs qualify for inheritance tax relief?

AIM VCTs do not qualify for IHT relief – read why. If inheritance tax mitigation is a priority, Unicorn also offers an AIM IHT portfolio.


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: 29 January 2019

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