FOR PROFESSIONAL INVESTMENT SPECIALISTS
A G O L D EN DAWN
M AGAZINE
GOVERNMENT BACKED - GREAT BRITISH INVESTMENTS - EIS - SEIS - BR - SITR - VCT
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GrowthInvest: Simplifying tax efficient investments. Igniting the UK economy. The tax efficient investment market has changed significantly in recent years. With tax efficiencies being clearly directed toward growing the UK’s most promising young companies, there has never been a better time to get involved.
products, or perhaps considering them for your clients’ portfolios, contact us at GrowthInvest. We’ll show you how you can consolidate historic investments onto our platform and build a diversified portfolio from a wide range of tax efficient product providers.
However, diversification and transparency has never been more important and with this comes an administrative headache.
Through our intuitive online platform you’ll be able to offer your clients easy access to real portfolio growth, secure in the knowledge that these government-backed schemes offer unique tax efficiencies.
At GrowthInvest we provide advisers a single portal to compare, invest in and manage clients’ tax efficient portfolios, integrating seamlessly with your backoffice solutions. Whether you’re already advising on SEIS, EIS, VCT or BPR
Visit us to learn about the products, the pitfalls and how best to advise on this dynamic and evolving sector.
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CONTENTS CHAPTER • 1 News
A round up of industry news
CHAPTER • 2 Governance in the World of Business Relief
Dr Brian Moretta, Head of Tax Enhanced Products at Hardman & Co, on why advisers need to look at the quality of governance behind business relief products
Managing EIS Risks: Examining the Baby and the Bathwater
Oxford Capital on the rules changes, the risks and the opportunities
The Exiteers
Bringing you news of successful exits in the sector
The Growing Popularity of VCT: Should you Invest?
Darius McDermott, Managing Director of Chelsea Financial Services, looks at VCT Opportunities in the market and why advisers need to keep their eyes peeled
Tech Talk: Understanding the Jargon when investing in EIS
Andrew Aldridge, Head of Marketing at Deepbridge Capital demystifies the tech speak
The New Kids on the Block
An investment showcase bringing you the newest offerings from the sector
CHAPTER • 3 GBI Round Tables
Insightful and informative articles emerging from key topics raised and discussed at GBI West Midlands Round Table, and GBI VCT Round Table held in London
CHAPTER • 4 Open Offers
Our monthly listing of what’s currently available for subscription
Disclaimer
performance is no guarantee of future performance. The value of shares in any investee companies may go down as well as up and investors may not get back the full amount invested. Investors should not consider investing unless they can afford a total loss of their investment. Investments in unquoted shares carry higher risks than investments in quoted shares and involve a degree of risk as well as the opportunity of reward. It may be difficult to sell or realise the investment or obtain reliable information about its value. Any tax reliefs referred to in this publication are those currently applying or expected to apply. However, readers should be aware that tax reliefs and legislation can change. Their applicability and value will depend upon the individual circumstances of a given investor. Whilst the investments set out within may qualify for EIS and other tax advantageous breaks, there is no guarantee that EIS status or other tax efficient status can be maintained throughout the life of the investment. Both investee companies and investors need to comply with the requirements of the EIS legislation in order to maintain EIS Relief and non-compliance may result in the loss or partial claw-back of EIS Relief and potential interest penalties. The material in this yearbook is not to be regarded as an offer or invitation to buy or sell an investment, nor does it solicit any such offer or invitation, nor does it seek to endorse any particular investment product. Any information it contains is given in good faith, but no reliance should be placed upon the same. Applications to invest in any investment product referred to within should be made to the relevant promoter. GBI Magazine neither endorses any particular member, product or company/firm wishing to raise money under the EIS nor does it accept any liability for advice given. GBI Magazine is published by and a trademark of IFA Magazine Publications Ltd, Arcade Chambers, 8 King’s Road, Bristol BS8 4AB, Telephone 01173 258328 @2018 all rights reserved.
GBI Magazine is for professional advisers only. All material has been carefully check for accuracy but no responsibility can be accepted for inaccuracies. Wherever appropriate independent research and where necessary legal advice should be sought before acting on any information contained in this publication. The information and offers contained in this yearbook may not be suitable for all investors. Readers should be sufficiently aware of the risks and ensure that they are of a suitable category as defined by the Financial Services and Markets Act to review and invest in any of the potential offers or funds. The information given in this publication is not to be construed as advice relating to legal, taxation or investment matters. The information contained in this yearbook does not constitute or form part of any offer to issue or sell, or any solicitation of an offer to subscribe or purchase any investment, nor shall it or the fact of its distribution form the basis of, or be relied on in connection with any contract. This yearbook is aimed at UK Investors and is not aimed at persons who are residents of any other country, including the United States of America and South Africa where the funds referred to herein are not registered or approved for marketing and/or sale and where the dissemination of information on the funds or services is not permitted. The information provided in the yearbook is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution, publication or use would be contrary to local law or regulation. The information contained herein may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of GBI Magazine. No representation, warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or opinions contained in this publication. As such, no reliance may be placed for any purpose on the information and opinions set out within it. Past
GBI Magazine is published by IFA Magazine Publications Ltd, Arcade Chambers, 8 Kings Road, Bristol BS8 4AB
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Telephone: +44 (0) 1179 089686
Commissioning Editor: Michelle McGagh
Editor-in-Chief: Michael Wilson editor@ifamagazine.com
Publishing director: Alex Sullivan alex.sullivan@ifamagazine.com
City Editor: Neil Martin neil.martin@ifamagazine.com
Design: The Wow Factory www.thewowfactory.co.uk
Full subscription details and eligibility criteria are available at www.gbinvestments.co.uk ©2017. All rights reserved. Full subscription details and eligibility criteria are available at www.gbinvestments.co.uk
GBI Magazine is for professional advisers only. GBI Magazine is a trademark of IFA Magazine Publications Limited. No part of this publication may be reproduced or stored in any printed or electronic retrieval system without prior permission. All material has been carefully checked for accuracy, but no responsibility can be accepted for inaccuracies, independent research and where necessary legal advice should be sought before acting on any information contained in this publication.
What do we mean by ‘government backed’? In the interests of clarity, any reference made by GB Investments to the point that EIS, VCTs and similar investments are government backed relates to the government’s general approval of these schemes, indicated by their having granted them highly tax advantaged status. The use of this term does not imply that government would in any way act in the capacity as a guarantor or backer of last resort in connection with such schemes.
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It’s your time. Invest it wisely.
Only read what’s worth reading.
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News
Former Tory party treasurer Lord Fink backs Project Etopia Former Conservative Party Treasurer Lord Stanley Fink has backed the next generation of UK housing with a £3 million investment in turn-key homes pioneer, Project Etopia. Project Etopia claims to be the only turn-key homes specialist in Britain to create turn-key properties that combine passive design, affordability, renewable energy generation, intelligent heating and cooling systems and smart home technology. The cash injection from Lord Fink — currently Chairman of investment manager ISAM Europe — will help the company scale up its operations and market share over the next two years. It comes as councils increasingly turn to turn-key building to rapidly boost stock levels of quality homes at drastically lower cost than traditional bricks and mortar. Project Etopia’s houses all incorporate smart technology, mechanical ventilation, heat recovery, air purification, daylight mimicry lighting, and solar power as standard. Lord Fink said: “My affection for UK property investments is no secret and, given the current state of the housing crisis, I see a brighter future for firsttime buyers if they are able to buy high-quality turnkey houses that offer technology that is relatively rare even in modern new-build developments.
“Project Etopia is a novel, credible, affordable and environmentally friendly way to provide starter homes for young people. Short build times, truly desirable houses and a broken housing market are three good reasons why Project Etopia has a colossal opportunity to deliver a lasting social impact. “Generations of Britons are frankly desperate to get onto the housing ladder and I’m convinced these types of developments are going to play a central role in making that dream a reality for millions.” Joseph Daniels, Chief Executive of Project Etopia, added: “I feel so passionately about this business because so many young people are being forced to accept that it’s unlikely they will ever own their own home. “Traditionally, affordable housing has gone handin-hand with low quality housing. We are going to be burying that preconception with homes that are truly ‘des res’ for aspiring professionals and families. “We’re going to lead the way in providing state-ofthe-art housing for a reasonable price tag, while continuing to develop our technology to make each project superior by design and with ever shorter build times.”
GB Investment Magazine · October 2018
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News
Seneca plays the tunes Seneca Investment Managers has backed the Hipgnosis Songs Fund, a royalty-based investment fund, across its portfolio of funds. Gary Moglione, Fund Manager at Seneca Investment Managers, said GBI Magazine: “The Hipgnosis Songs Fund has raised £200 million to buy catalogues of songwriter royalties. Songwriters receive a share of royalties from a variety of different sources, including when their music is used in TV adverts, films, and videogames or digitally streamed, and essentially the fund seeks to acquire this copyright interest. “The catalogue is managed by Merck Mercuriadis, an industry veteran of 34 years who has managed artists such as Elton John, Guns N’ Roses and Iron Maiden and is supported by an experienced advisory board. “The fund’s objective is to pay investors a 5% yield whilst targeting a total net asset value annual return of 10% over the medium term (net of fees).
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“Although music industry earnings had been in decline over the last 15 years, we believe that an inflection point has been reached and we are potentially entering an era of growth. Life is becoming more difficult for piracy sites and the rise of Spotify has resulted in streaming revenue growth averaging over 40% per annum between 2013 and 2017. “Given valuation levels in fixed income markets, we are spending more time analysing other instruments that will give us access to “bond like” income streams and Hipgnosis Songs Fund fits this mould. Our scenario analysis shows the 5% yield target is highly achievable and there is a lot of potential upside. This gives the fund a good risk/reward profile. It also has the added benefit of diversification from many other investments in our portfolio.”
News
Seedrs forms partnership with US equity crowdfunding platform Republic Seedrs, Europe’s leading equity crowdfunding platform, has formed a partnership with US platform Republic. Seedrs told GBI Magazine that the collaboration will offer UK-based businesses the opportunity to run joint crowdfunding campaigns on Republic and Seedrs simultaneously, allowing start-ups to capitalise on large customer bases in the United States. Republic, the sister company to US platform AngelList, has been in operation for two years, funding more than 50 American start-ups. New York-based Republic champions start-ups across America, aiming to democratise investment and funding for companies everywhere. Seedrs operates a pan-European platform with its headquarters in London and entrepreneur hubs in Berlin, Amsterdam and Lisbon. Caroline Hofmann, Chief Operating Officer at Republic, said: “We’ve enjoyed getting to know Seedrs over the past months and are confident that this relationship will be beneficial to start-ups with a global reach. Our American investors will now have the opportunity to invest in companies in the UK and Europe. The partnership offers great opportunities for investors on both sides of the Atlantic.” Ben Aronsten, Chief Marketing Officer at Seedrs, added: “This partnership is an exciting move for Seedrs. We’re thrilled to be able to give British and European companies the opportunity to tap into their U.S. customers and communities with a co-raise option. The partnership was a natural fit as Republic is aligned with Seedrs’ best practice views on how to do equity crowdfunding properly, and we share in our pursuit of democratising both fundraising and investment. We’re thrilled to be working with them.”
GB Investment Magazine · October 2018
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News
UK CIOs want tech skills crisis solved UK Chief Investment Officers (CIOs) want the country’s tech skills crisis solved and they are calling on government, businesses and universities to help. Research from recruitment specialist Robert Half Technology UK shows that 31% of UK CIOs feel that actively promoting IT as an attractive career path to millennials and generation zeros is crucial to address the skills gap. Another 20% believe that an equal mix of measures – including more investment in training, closer collaboration with educators and additional government initiatives – is the best approach to solve the crisis. This view is held across Europe, with the continent’s CIOs agreeing that a mix of these initiatives would be beneficial in solving the skill shortage, even if exact solutions differ. CIOs in Belgium place higher priority on promoting IT as career path for millennials/ generation z professionals (45%). Whereas French CIOs place greater importance on in-house training (21%) compared with 13% in the UK to address the tech skills crunch. Businesses are already facing increasing competition for talent in the technology sector. And 79% of CIOs claim it is now more challenging to find qualified
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GB Investment Magazine · October 2018
professionals than five years ago. This is comparable with Europe, where 67% of CIOs agree that it is more challenging today. With a possible tech talent exodus imminent, upskilling and training current and future employees now is key to the UK’s continued competitiveness. Matt Weston, UK Managing Director at Robert Half, said: “With continued uncertainty surrounding Brexit and the potential of reduced access to skilled EU workers combined with visa caps, the IT skills gap is likely to increase unless all we take positive steps to address it,” commented “By taking a holistic approach to tech recruitment challenges, UK organisations will start to see more candidates attracted to a career in IT. “Our research shows that the UK is not alone in its challenge to find qualified, highly skilled IT professionals. This is a worldwide issue that is particularly prominent in IT as digital transformation, automation and industry 4.0 shapes the future of the working world. CIOs in the UK recognise that if government, businesses and universities can work together to provide the correct environment to nurture, develop and train IT professionals, the benefits to both organisations and employees will be a major boost to the UK economy.”
ACQUISITION AND SALES
O F I FA BUSINESSES Retirement? Time for a change? There are countless reasons to dispose of an IFA business, just as there are countless reasons to get hold of one.
W E A RE A SPECIAL IST FINANCIAL S A L E S , C O N S U LTA N C Y A N D B R O K E R AGE BU SIN E SS. Gunner & Co.’s mission is to work directly with you, whether you are looking to realise the capital in your business, or you are looking for growth through a merger or acquisition. We consider every business to be unique, and therefore finding the right solution for you starts with a thorough understanding of your business operations and your wish list. Only from here can we make valuable introductions which align to both party’s needs. If you would like to discuss options to sell, exit or retire, or acquire IFA businesses, please get in touch for a confidential discussion.
louise.jeffreys@gunnerandco.com
gunnerandco.com
GOVERNANCE IN THE WORLD OF BUSINESS RELIEF Advisers need to look at the quality of governance behind business relief products, says Hardman & Co
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GB Investment Magazine · October 2018
When advisers first start looking at business relief (BR) products, there is much to look at: the rules governing such products, investment strategies that are being used and what the investment risk is. It is easy to lose sight that for non-AIM products, the investment is being made directly into a company or partnership rather than a fund. This means it is essential that governance is part of the diligence process. Independent directors In the investment trust/company industry, the concept of independent directors is not only well known, but an argument that has long been settled. For the vast majority of investment trusts, the fund manager is a separate entity from the company that investors own shares in. The manager supplies services in return for a fee. The board has discretion as to how much the fee might be, or whether the manager should remain in that role. Once upon a time, investment trust boards consisted primarily of people connected to the manager, with all the potential for conflicts of interest that that brought. Over time, it was realised that this was a ‘bad thing’ and it was deemed that a majority of the board should be independent of the manager. Most non-AIM BR products have much in common with investment trusts. Most of the companies have no employees, with managers being paid a fee or having expenses covered for both fund management and company management. What is surprising then, is that over half the products in our database invest into companies with no independent directors.
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This would seem to be important - in private companies, transparency is usually more limited than for quoted companies. From the research we have undertaken, over a quarter of products invest in companies that publish abbreviated accounts rather than full accounts. This is not restricted to the smaller companies: the smallest company publishes full accounts, while some of those with abbreviated accounts are among the larger in the sector. When information is limited, it is hard for investors to validate that companies are doing what they say they are. Potential conflicts of interest There are more concrete areas in which potential issues manifest. Many advisers are aware that potential conflicts can arise. At its simplest, these are the same issues as for investment trusts, such as whether the fees or expenses are appropriate. However, the potential for conflicts in BR runs deeper. Many companies have participated in related party transactions, which take one of two forms. The first is buying assets that were previously under the management or control of the fund manager. Mostly these have been renewable energy assets, such as solar or wind farms that were previously in companies funded through EIS schemes. These can create a potential asymmetry of incentives for the fund manager, who may be due a performance fee for the sale or could lose market credibility for a poor outcome. And while some transactions have been small, others have been significant. The second transaction is lending to related parties. Typically, this is making loans to other companies run by the fund manager, for example to fund the construction of renewable energy projects. Again, there is the potential for inappropriate pricing, though generally Hardman & Co views this as being less concerning than for asset transfers. Not only are the loans usually asset backed, but the connection can make diligence both easier and more comprehensive, so there are offsetting benefits. If a company were quoted, then the independent directors would have a key role to play in ensuring that shareholders are being treated fairly. In the BR area, matters are less clear. While the managers we have spoken to have outlined their process for assessing the transaction price, and made these sound reasonable, independent oversight of this process would give some reassurance.
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For investment trusts, independent directors have a key role to play in ensuring that investors are treated fairly. In the BR area, matters are less clear
Setting share prices Another area that is worth highlighting is the share prices used for transactions. Most of the trades generate revenues from assets that they hold or lend using assets as security. Consequently, share prices are asset based. Over half of products use the net asset value (NAV) from the audited accounts, or the same basis between year ends. However, a substantial minority, all of which invest in renewable energy assets, are using a distinct share price. The rationale is understandable: market values of these assets have moved in a way their accounting does not reflect. Where a company has constructed a project then, if it is successful, the market value should exceed the book value of the investment. However, using valuations that are outside the audit process raises governance questions. From a governance perspective, the manager that has perhaps the clearest approach uses a named external consultant for the valuation and specifies the key assumptions, most notably the discount rate used. The latter is particularly useful for an external analyst, helping with assessments of whether the company will achieve its target returns and allowing easier comparisons with others in the market. Brian Moretta is the Head of Tax Enhanced Products at Hardman & Co and also leads the research of financials stocks and investment funds. He has lectured on actuarial science and financial economics at Heriot-Watt University, is an examiner for the Faculty & Institute of Actuaries and is on the Bankers without Borders Financial Modelling Reserve Corp. He is a former fund manager with a 20-year career in financial services. Brian holds a PhD in Applied Probability and a BSc in Actuarial Maths and Statistics. Hardman & Co are now offering panel, advisory and educational services in the Business Relief market. Please contact Vilma Pabilionyte on 0207 194 7637 or vp@hardmanandco. com to arrange a meeting or call.
Unfortunately, they are the exception. Most managers are happy to outline the process they use but, while these seem reasonable, the lack of external validation has to be a serious concern for advisers. While the price of electricity has shown some volatility over recent years, the market for the assets appears to have remained solid. This suggests that in the current market, market evidence should converge on a clear valuation basis. If circumstances become less benign, this may become more difficult and an external audit will have more value. This is not to say that there are no issues in the market at present. Given the comments above, it is not surprising that the growth in NAV per share has lagged the share price growth from these companies. In a strong market for the underlying assets, the premium to NAV may be justified. However, having a rising share price when the NAV per share is falling should require further investigation. An adviser should probably be sure that the premium is justified before recommending such products to clients. In the world of quoted investments, governance is a topic that has been getting increased attention. It is probably time that it got the same attention in the unquoted world too.
GB Investment Magazine ¡ October 2018
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MANAGING EIS RISK: EXAMINING THE BABY AND THE BATHWATER Rule changes mean EIS investing is more risky but that doesn’t mean there aren’t opportunities, says Oxford Capital In the Financial Conduct Authority’s (FCA) view, EIS investing has always been high risk. But, the reality is that many offerings have focused on the investor tax benefits much more than the companies EIS was originally designed to assist. The government has decided this was detrimental to the main aim of EIS - to encourage investment into early stage, smaller, younger UK companies with high growth potential. Consequently, in the last nine months it has taken measures to prevent investment structures that provide a low-risk return from qualifying for EIS. This has undoubtedly shifted the risk profile of some sub sectors of EIS investing. But, as EIS Association (EISA) Director General Mark Brownridge put it in the EISA’s recent report, EIS; New Landscape, New Opportunities, there is “a very real danger of the baby being thrown out with the bathwater”. The changed risk profile certainly demands full and proper understanding by the adviser community, particularly in relation to those managers who have been forced to pivot their investment activities to comply with the new regulations. But EIS remains a crucial funding mechanism for emerging businesses – around 30,000 have already benefited from over £16 billion of investment. Beyond this, with careful consideration, EIS also continues to offer suitable and justifiable solutions to various financial planning issues for a broad range of investors with differing needs and risk/reward sensitivities.
Generous reliefs remain For a start, the recent changes have solidified EIS as a legitimate scheme, giving certainty to everyone involved. With personal tax investigations becoming one of the fastest growing revenue streams for HM Revenue & Customs (HMRC) in the last two years, according to UHY Hacker Young, and growing scrutiny of what it considers as tax avoidance, the government has again demonstrated its support for the scheme.
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There has been no erosion of the generous tax reliefs on offer (subject to investors holding EIS qualifying shares for the required time periods). The rationale is to compensate for the additional risks and costs of involvement in startup or SME firms and the consequent downside protection of the reliefs available is still substantial: •
30% income tax relief
• Capital gains tax deferral for gains invested into EIS qualifying companies • Capital gains tax exemption for profits from the sale of EIS qualifying shares •
Loss relief allowing any losses (less the income tax relief already received)
• Likely business relief qualification with potential 100% inheritance tax saving on EIS qualifying shares
So, what has changed? An investment must now meet the following requirements to be eligible for EIS investment: •
The company in which the investment is made must have objectives to grow and develop over the long term
• The investment must carry a significant risk that investors will lose more capital than they gain as a return (including any tax relief). The upshot is that capital preservation strategies are no longer allowed. Consequently, companies employing structures where asset backing, such as a pub owning the freehold, or contract backing, such as a film-production company with distribution contracts already in place, are now highly unlikely to be eligible for EIS. HMRC is using a “principles-based test”, applying a ‘rounded’ approach, to assess the level of risk to capital on a case-by-case basis. Of course, the EIS market has not just focused on capital preservation strategies and there are plenty of opportunities to invest in EIS qualifying companies which have had no assets to pledge as protection to investors, nor pre-agreed income streams.
Brownridge said: “If you understand risks you can mitigate them and improve your chances of success.” And the managers with long term involvement in growthfocused EIS investing understand the risks and that their activities can be a critical contributor to their success or failure.
Many risks can still be minimised Putting all your eggs in one basket by investing in a single company can be a big issue. It might be a winner, but it might not, leading to total loss other than loss relief. Good EIS managers actually plan success by expecting some failures among their investees. Of course, they target companies that fit a considered investment strategy and have been reviewed against a rigorous selection process, after in depth due diligence, as the aim is for a significantly improved success rate. But the reality and the statistics cannot be ignored; smaller, younger companies are more prone to failure. Experienced managers mitigate this risk by building diversified portfolios of EIS-qualifying companies to spread risk and improve the chances of good overall returns. This can be achieved by varying the sectors, geographic regions, managers, or maturity stages of the investee companies. This last method balances earlystage investments that have high potential but are higher risk with later-stage investments with a higher valuation but lower risk.
The right manager, the right risk mitigation So, choosing the right investment manager is a key risk mitigator, although the selection process is only one of the factors to look at. As well as track record, including successful exits, the experience and expertise of the investment team are important. Not only do these affect the investment selection and beyond, they also inform the size and quality of the deal flow the manager has access to. EIS investment managers rely heavily on contacts, often developed during their careers. A good reputation can also open doors and attract opportunities. The more deals viewed, the greater the likelihood the best deals will be identified and the better the likely quality of the deal that is eventually invested in. The level of ongoing involvement with the investee company is an indicator of how much influence a manager
has on the specific risk that applies to that company. HMRC advance assurance gives a stamp of approval that a company and investment structure appears to meet EIS-qualifying criteria, based on the information provided to HMRC. But, it doesn’t guarantee the company will not, at some point, fall foul of qualification by undertaking activities that break the rules. Proper monitoring of what investee companies are doing is vital to reduce or remove the potential for a company to become ineligible for EIS, leading to clawbacks of the tax reliefs.
Specialist support Beyond monitoring, the provision of specialist business support to help nurture an investee company can be invaluable. Early-stage businesses can be easily distracted by the volume of day-to-day operational challenges. Expert input into prioritising the strategies that will drive value creation may not be accessible to the investee company unless an investment manager can deliver it. And managers with board presence and the ability to set and access key metrics to compare progress against strategic milestones can also introduce an important degree of accountability. Many early stage EIS managers recognise that managing these investments is an active process. What’s more, the close working relationships that can result, put them in a great position to identify companies with positive metrics that are ready to scale. Another risk that should not be overlooked by advisers is the risk of not engaging with EIS. Some commentators expect a drop in demand from advisers and investors with a singular interest in low-risk schemes. However, a broader view should take into account a likely increase in demand from those looking for pension alternatives as a result of tighter restrictions on pension contributions, and CGT shelters. There is no lack of companies with ambition to grow and the new rules seek to incentivise innovation and entrepreneurship. Indeed, it’s worth remembering that EIS has not been singled out and punished with the new regulations. Instead, it has been identified as a crucial driver of SME prosperity with the potential for impressive investment gains, the reality of substantial tax reliefs and the considerable advantage of seasoned and sophisticated early stage EIS managers.
GB Investment Magazine · October 2018
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THE EXITEERS Bringing you news of successful exits in the sector Fund: Seneca Partners, EIS Portfolio Service Exit: Gear4Music Details of the fund Seneca Partners invested £1.25 million from its EIS Portfolio Service in Gear4Music in June 2015 as a cornerstone for the company’s IPO on the FTSE AIM. At the time, it was the largest EIS investment Seneca Partners had made and represented c.5% of assets under management. What does the company do? At the time of investment, Gear4music was one of the largest UK based online retailers of musical instruments and music equipment. Founded in 1995 by Chief Executive Andrew Wass, Gear4Music Limited, the group’s main trading company, had been profitable since its launch as Gear4Music in 2003 and has accelerated its revenue growth during the two previous years, from £12.3 million in 2013 to £24.2 million in 2015. Operating from an office, showroom and distribution centre in York, the group sells own-brand musical instruments and music equipment alongside premium third party brands including Fender, Yamaha, and Gibson. Its customers range from beginners to musical enthusiasts and professionals, in the UK and, more recently, in Europe.
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Having developed its own e-commerce platform, with multilingual, multi-currency and fully responsive design websites covering 19 countries, the group has rapidly expanded its database (which currently has details of more than 750,000 people) and continues to build its overseas presence. What did the company invest the money in? Funds were used to support the following: • International expansion, in both existing and new geographical markets: - increasing websites
‘localisation’
of
international
- launching new websites in further territories • Accelerated development of the group’s bespoke ecommerce platform: - driving higher website traffic and conversion rates -
increasing fulfilment efficiency
• Intelligent marketing to new and existing customers: -
extending the reach of marketing activities and increasing return on marketing investment
- content personalisation efficiency
to
drive
In total, we returned c.£6.5 million to investors and generated a 5.2x money multiple return, excluding any tax benefits through the EIS.
• Product range extension: - extending the range of SKUs, particularly those available for next day delivery - extending own-brand ranges additional product categories
How much was returned to investors?
into
• Opening a flagship London showroom: - improve penetration in the London area
If an investor had invested £1,000, they would have received £5,200 from the sale of the shares and £300 income tax relief from the original investment, i.e. £5,500 overall. We target a return for investors of between 1.5x and 1.8x, so this exit was well in excess of our target.
- further establishing Gear4Music’s position as a key retailer for suppliers
What other benefits has the company provided?
• Opening new distribution centres to drive sales growth and efficiencies across mainland Europe
Following our investment, the company achieved the majority of the points listed above, but also:
How much was raised? On IPO the company raised c.£10 million in total. How was the exit achieved? Through continued relationship development with corporate broker Panmure Gordon, we were able to work closely to identify a buyer and maximise investor returns.
- Grew revenue from c.£24 million to c.£80 million - Grew EBITDA from c.£1 million to c.£4 million -
Expanded across Europe with the opening of two distribution centers in Sweden and Germany
-
Grew headcount from c.80 to 200+
GB Investment Magazine · October 2018
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THE GROWING POPULARITY OF VCT: SHOULD YOU INVEST? Darius McDermott, Managing Director of Chelsea Financial Services, looks at VCT opportunities in the market and why advisers need to keep their eyes peeled
During the last tax year, VCTs raised the secondhighest amount of capital since their inception, and the highest ever amount since the 30% income tax relief was introduced 12 years ago. But why the sudden rise in popularity?
They have also fared well despite Brexit-related uncertainty and the fear that this could impact UK smaller companies. However, UK small-caps (including the sorts of start-ups which VCTs invest in) have performed well.
I posed this question to a spokesperson from taxefficient investment specialist Calculus Capital, who told me that there are several reasons behind the “huge growth in popularity” of VCTs. Firstly, she said adviser and investor confidence in VCTs has grown as the asset class has matured and proven itself over time. She also pointed out that, as of last year, high-rate taxpayers’ pension contributions are tapered; for every £2 of income earned over a salary of £150,000 per year, the allowance falls by £1. This means that those who were lucky enough to make the full contribution are looking to invest the remainder of their savings.
In my view, this is simply because the UK is lucky enough to house some of the most successful, innovative market leaders in their respective fields, and many of these are further down the cap spectrum.
“Whilst VCTs are not a substitute for pensions, they are an attractive product to sit alongside,” she reasoned. “In November 2017, VCTs also saw an increase of flows in the lead-up to the Chancellor of the Exchequer’s Budget, thanks to rumours that the 30% income tax relief would be slashed.” The rumours proved unfounded – for now at least – but VCT offers filled up quickly. Regulation changes have also altered the types of companies which can receive VCT funding. As such, we have noticed that VCTs have been raising capital less frequently, but look to raise larger chunks of money each time. The result of all this is that the investable pool is smaller than it usually is around this time of the year.
How have VCTs performed? Many VCTs have performed well for several years, even during times when the broader market has struggled.
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Not only this, smaller company shares have done well because, in the run-up to the EU referendum in 2016, a lot of small UK businesses were sold off and ended up trading at a 20% discount compared to UK large-caps. Their prices then rose as investors saw this as a buying opportunity. This, combined with the fact that a weaker sterling made small-caps more attractive propositions for overseas investors to purchase, has stood small UK companies in good stead over the last couple of years. In fact, even though they’ve done well, UK smaller companies are still at a 10% discount compared to their larger peers - another reason they are still attractive. And there’s an air of optimism among the managers themselves. Richard Hoskins, co-founder of Kin Capital which promotes Pembroke VCT, said he has been seeing an increase in the number of driven, bright, young founders who have steered away from traditional risk-averse employment routes after leaving university. “More and more graduates are seeing entrepreneurship as a valid career path,” he told me. “They have often teamed with friends who are passionate about their innovative business concept, and approach us for investment after having proved the concept and then driven through initial early-stage growth.”
Here at Chelsea, we see no reason why their strong performance of VCTs can’t continue. We think it’s about the capabilities of the VCT managers themselves, and not just the strong performance of small UK businesses. Even though investing in start-ups and younger companies is higher risk, the level of due diligence we see among many VCT managers is impressive. VCTs can also build up cash reserves, which means that they can still pay out their tax-free dividends to investors during the trickier times.
Offers Because of the rush into VCTs last year, offerings are a bit thin on the ground at the moment; especially when it comes to some of the more mature VCTs. However, there are some younger VCTs which are still open – simply because investors aren’t as familiar with them - which we think are attractive. One example is Seneca, which closes in April 2019 and was only launched earlier this year. However, the firm has a long track record in managing taxefficient investment vehicles. Also, unlike many new VCTs, it should be able to start paying out tax-free dividends sooner rather than later – this is because Seneca partnered with Hygea VCT and is launching a new B share class. This new share class will be able to dip into the reserves on Hygea’s balance sheet to fund its dividend payments until its own investments are mature enough to pay out income.
Schemes] growth fund and portfolio service, having invested in excess of £50m in over 70 investment rounds,” he said. “So, whilst the recent rule changes have forced existing VCTs to alter their investment strategy, for Seneca this is simply a continuation of its well-established investment strategy.”
Research Investors shouldn’t by any means ignore VCTs that are currently closed, either – it’s always a good idea to have VCTs that you like on your radar for when they start raising capital. Another example of a new VCT we like is Calculus, which was launched in March 2016. Despite its short track record, the firm has more than 20 years’ experience investing in small and medium-sized enterprises (SMEs), having launched the UK’s first HMRC-approved EIS fund 20 years ago. The management team monitors the macroeconomic picture as well as selecting individual companies. This is because a lot of companies that it invests in, while domiciled in the UK, are global-facing. The team particularly likes the technology and healthcare sectors at the moment, because they underpin the UK government’s desire to stay at the forefront of innovation.
John Davies, investment director at Seneca Partners, told me that the recent VCT rule changes are one of the key reasons Seneca came to market with its own VCT offering.
“We have been privileged with our deal flow through having very well established channels that bring us deals,” the team told us. “We very rarely find ourselves competing against others, and occasionally when we do, we work successfully together. There are of course challenges but having been a growth investor for 20 years, we have never seen the level of entrepreneurial activity in the UK as it is today.”
“For the last six years, Seneca has operated and performed well in the growth capital investment space, though its EIS [Enterprise Investment
To sum up, while VCT offers are limited right now, some thorough research could stand investors in good stead when the next round opens.
GB Investment Magazine · October 2018
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TECH TALK: UNDERSTANDING THE JARGON WHEN INVESTING IN EIS As technology investing through EIS grows in popularity, Deepbridge Capital Head of Marketing Andrew Aldridge demystifies the tech speak In the twenty-first century, technology is all around us and is shaping the world we work and live in. To this end, it is natural that technology-focused companies will form part of investment portfolios and this is never truer than in the EIS sector where the Government is increasingly incentivising investment to focus on ‘knowledge intensive companies.’ As the ‘tech revolution’ continues we are often asked what sectors are ‘hot right now’ and we witness flurries of buzzwords as people seek to jump on the next bandwagon. As the technology and life sciences investment experts, we invariably see these trends emerge and disappear and it is important that we focus on the credibility and opportunity offered by a prospective investee company rather than being distracted by the crowd. However, while we as a sector-focused manager might understand all of the terminology and trends, we recognise that not all advisers will feel so confident in broaching these subjects with a client, even if recommending, for example, a technology focused EIS or SEIS product to them. ‘She blinded me with science’ isn’t just a great pop lyric but it can be a truism in many markets, especially when the market changes so quickly, new tech is being unleashed all the time, and firms are seeking real competitive advantages by pushing the envelope day after day.
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With that in mind, it’s always useful to appreciate some of the basic terminology and trends, especially if you’re an adviser active in the tax-efficient space. How else might you answer a client on why an investment manager is investing in one company over another and what is it seeking to do with the client’s investment monies in order to develop, grow and target that all-important return? So, let’s look at some of the current ‘buzzwords’ in the technology sector.
1. Blockchain First up, the much-talked about Blockchain – very much associated with - but not limited to -cryptocurrency, Bitcoin. Blockchain are blocks of digital information that can be distributed across many networks but can’t actually be copied. It’s for this reason that there’s great interest in Blockchainbased transactions as they provide a degree of security of information. Blockchain creates ‘digital value’ – it is shared information that can be reconciled/updated continuously and as Don and Alex Tapscott, authors of Blockchain Revolution put it: “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
2. Artificial Intelligence But what about other tech terms may be banded about? Artificial Intelligence (AI), or machine intelligence, is in contrast to natural intelligence shown by humans and machines. So, in tech/computer sciences AI can be viewed as tech which responds to its environment and takes action by itself, based on changes in that environment, in order to maximise the chance of it successfully achieving its goals. It’s a lot to do with machines ‘learning’ and ‘problem solving’ and it’s meant to mimic how a human being might adapt and find a solution based on the factors it encounters. For those of a certain age, this might seem a little too close to the Terminator films, however, there are clearly benefits to be had from tech that learns, adapts and makes quality decisions based on a greater understanding of its environment.
3. Virtual Reality Another term that may well be heard is virtual reality (VR), alongside augmented reality (AR). Essentially, with VR you can create a virtual, immersive environment within technology; utilising VR, users can be transported into their VR ‘world’ which can resemble real life or conversely look nothing like our own world. AR is based on a ‘live view’ of the world but adds digital elements to it – the most famous example in recent years is probably Pokemon Go, where people were using their phone cameras to ‘catch’ Pokemons on the ‘streets’.
Avoid buzzword investing
to shoehorn these words into a business plan or a description is likely to be doing more harm than good, and would certainly be off-putting to us. So, what do we want to see? Well, it makes sense to marry the technology with the other assets the investor company has at its disposal. Don’t get me wrong, the technology is vitally important – this is the intellectual property and it is absolutely vital to have a robust strategy around the IP’s development and future usage. After all, it’s the asset that’s being invested in and we would undoubtedly be looking for any hardware to have the necessary patents and, while software can be difficult to patent, the firm should have, or be in the process of, securing copyrights and developer restrictive covenants which may actually form part of that intellectual property strategy. However, the other ‘asset’ is just as important and that’s the team behind the innovation. A robust IP strategy coupled with a committed and engaging founding team, plus a product or service which is globally scalable, and one that has multiple vertical markets at its disposal, adds up to a truly engaging investment opportunity. Using these criteria we seek to maximise returns and ensure our approach continues to sit comfortably with the Government’s Risk to Capital and Knowledge Intensive Companies criteria and intentions. So, as can be seen, the ‘tech speak’ is useful to understand but it is perhaps more important that advisers work with investment managers that know how to identify, value, commercialise and exit tech companies – having access to such sector experts is invaluable when seeking to maximise opportunities.
Many of the investee companies we work with are using some (or all) of the above to shape their propositions, products and services, and while some will be pretty far down the road in terms of their business ‘life’, some might just be an idea which has the potential to be grown, adopted and change all kinds of environments. The important thing to remember with any investment manager is that they should not be investing in the ‘buzzword’ – in fact, a company or individual that tries
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THE NEW KIDS ON THE BLOCK An investment showcase bringing you the newest offerings from the sector Investment: Seneca Growth Capital VCT Aim: Investing in established and well-managed businesses with a turnover of up to £100 million
Tell us about the fund Seneca is an experienced growth capital investor that has invested more than £50 million over the last five years into growing companies through the Seneca Growth Capital EIS Fund and the Seneca EIS Portfolio Service. The VCT being launched is an extension of our deal flow and deployment capability and offers investors a different access point to growth opportunities from that offered via EIS. With over 70 experienced professionals, Seneca is an established, award-winning SME specialist based in the North of England providing equity and debt through a number of different specialist channels to businesses with annual turnover of up to £100 million. Seneca also has a fully integrated corporate finance division, which can act on both buy-side and sell-side mandates alongside general restructuring and advisory assignments. Essentially, Seneca has a well-developed footprint and a strong intermediary network in the Northern regions of the UK, which provides a buoyant deal flow pipeline from which it selects its investment candidates. For some time, Seneca has been looking to establish a VCT as a new offering for its client base and has reached agreement with the board and existing shareholders of Hygea VCT to issue a new, separate ‘B’ share class with this new pool of assets being separately managed by the Seneca investment team with a more generalist investment policy than the one that applied to the existing ordinary share class. The new ‘B’ share class will form a separate pool of capital (distinct from the existing pool of capital represented by the ordinary shares) and will be managed by Seneca on behalf of the company, focusing on investment into growth companies which reflects the experience and expertise of the Seneca team. This investment experience is of particular relevance in view of recent changes in VCT legislation. The Finance (No2) Act 2015 introduced a number of significant changes to the VCT rules, imposing restrictions on the types of transactions and companies into which VCTs are able to invest. While this may result in a strategy shift for many VCT managers, Seneca’s growth capital investment experience is well matched with the changing landscape.
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Crucially, the ‘B’ shares will also benefit from the availability of distributable reserves and potentially allowing the company to pay dividends on the ‘B’ shares by the end of the first year. How much is being raised? The company is seeking to raise £10 million under the offer, with an over-allotment facility of a further £10 million. The company intends to distribute a large proportion of the net profits it receives by way of regular and special tax -free dividends. The company expects to make its first allotment of ‘B’ shares by the end of summer 2018 and the offer closes on 5 April 2019. What types of investments are being sought? Seneca has pursued a generalist investment strategy focused on providing capital to established, wellmanaged businesses with strong leadership teams that can demonstrate proven concepts, revenue generation and at least a visible route to profitability in addition to the potential to grow. The strength of Seneca’s network of introducers, professional contacts and interaction with the region’s entrepreneurs provides a consistently abundant range of opportunities. Seneca will typically review hundreds of investment opportunities each year and will progress to second stage meetings with many of them. The filtering process then continues through a detailed due diligence process, applying strict investment criteria and extensive screening to ensure the focus is purely on those businesses which it believes offer the best investment potential. Quality and capability of management teams and valuation entry point will be highly influential in our analysis. So, from a starting point of several hundred, only a fraction of these will ultimately be transacted. Seneca is sector agnostic with clear emphasis on the investment credentials of each business although we will stay away from highly specialised or businesses which may lack longevity. Our current spread of growth capital investments has no single sector representing more than 25% of the total value of our investments.
Another key feature is that, to date, approximately 45% of our portfolio of investee companies are AIM quoted. This feature is expected to be replicated through the ‘B’ share class as we believe that such a strategy increases diversification, provides a certain level of liquidity through capital market exposure and access to some of the UK’s most innovative businesses. What is the minimum investment? Minimum investment is £3,000 and currently, investors can claim income tax relief when buying newly issued VCT shares at the rate of 30% on investments of up to £200,000 per tax year. Investors must hold shares in a VCT for at least five years to keep the income tax relief. There is no capital gains tax from selling VCT shares no matter how short the holding period and there is no tax to pay on dividends. What is the targeted return? The Company aims to exit each of its qualifying exits in the ‘B’ share pool after approximately three-to-five year holding period. Broadly, we target a return of 15% internal rate of return, excluding tax reliefs, in a blend of growth and dividends through the holding period, making distributions to ‘B’ shareholders accordingly although of course this is not guaranteed. Provide details of the top three fund holdings As this is a new ‘B’ share class examples of our top three holdings are best demonstrated by reference to our EIS growth capital investments.
Yu Group c.£900,000 investment on IPO in March 2016 Yu is a challenger energy supplier to the corporate market, targeting SMEs in verticals such as healthcare, hotels and leisure, and construction. Highlights for 2017 were revenues of £47 million, c.£2.8 million ahead of forecast and EBITA was £3.1 million, c.£500,000 ahead of forecast. On IPO the share price was £1.85. The current share price (27/06/18) is c.£8.35, representing a return of c.4.5x on investment.
Wejo c.£3.8 million invested to date Wejo leverages the data derived from connected cars, through unique journey and other data capturing technology, to deliver business insights for a range of companies. These include OEMs and leading insurers and enable businesses to better connect with their customer base. Following Seneca’s recent investments, the company has continued to progress on all fronts, particularly through its proof of concept work with numerous OEMs. The next six months should prove to be pivotal in the company’s development as it looks to go live on two major contracts. Successful delivery of these contracts would see the company break-even in the short-term and would secure Wejo’s position as the dominant player in this sector.
Gear4Music c.£1.25m investment on IPO in June 2015 Operating from a head office in York and distribution centres across Europe, the group sells musical instruments and music equipment, globally. Having developed its own e-commerce platform, with multilingual, multi-currency and fully responsive design websites covering 19 countries, the group has rapidly expanded its database and continues to build its overseas presence. Highlights for 2018 included a 43% increase in revenue to £80.1 million. On IPO the share price was £1.39. The current share price (27/06/18) is c.£7.20, representing a return of c.5.2x on investment.
GB Investment Magazine · October 2018
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M AGAZINE
ROUND TABLE WEST MIDLANDS
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GB Investment Magazine · October 2018
Round Table
Participants Round Table, West Midlands Paul Wilson
Chairman | IFA Magazine Publications, Clifton Media Lab E: Paul.wilson@ifamagazine.com
Alex Sullivan
Managing Partner | IFA Magazine Publications, Clifton Media Lab E: Alex.sullivan@ifamagazine.com
Talon Golding
Co-Founder and Director | Novo Ventures E: talon@novoventures.co.uk W: www.novoventures.co.uk
Tony Stott
CEO | Midven E: Tony.Stott@midven.co.uk W: www.midven.co.uk
Andrew Aldridge Partner, Head of Marketing | Deepbridge Capital E: andrew.aldridge@deepbridgecapital.com W: www.deepbridgecapital.com
Philip Thompson
Business Development Manager | Deepbridge Capital E: philip.thompson@deepbridgecapital.com W: www.deepbridgecapital.com
Robert Clark
Richard McCaughan FPFS
E: rob@newsteadclark.co.uk
E: Richard@charteredfs.co.uk
W: www.newsteadclark.co.uk
W: www.charteredfs.co.uk
Managing Director | Newstead Clark Financial Services
Chartered Financial Planner
GB Investment Magazine ¡ October 2018
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Brexit fails to dampen EIS spirit The UK is still attracting record amounts of private capital post-Brexit as the number of investable companies continues to swell EIS providers are still finding a pipeline of investable projects post-Brexit, with technology investments seeing particular benefit. The British Business Bank, the UK government’s own investment bank targeting small and mediumsized enterprises (SMEs), saw the value of SME asset finance deals was up 12% in 2017, with the value and number of equity deals rose 79% and 12%, respectively.
A record £2.99 billion was invested in technology small and mediumsized enterprises (SMEs) in 2017, while a record £46 billion was invested into tech-focused funds in the year - a 600% increase on 2016. A survey of investors by the EIS Association (EISA) reveals the UK’s decision to leave the European Union, as voted on in June 2016, has done little to dampen enthusiasm for private investing.
A survey of investors by the EIS Association (EISA) reveals the UK’s decision to leave the European Union, as voted on in June 2016, has done little to dampen enthusiasm for private investing
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GB Investment Magazine · October 2018
Round Table
A total of 29% of respondents felt Brexit would strengthen SME productivity. Another 28% felt that knowledge-intensive companies, as defined in the new government rules and incorporates energy-tech, medtech, and fin-tech, will benefit from Brexit. While there is clearly stock market nervousness about investing in the UK, over a quarter of affluent investors feel more encouraged to invest in UK SME opportunities as a result of Brexit, while 18% are holding back until after Brexit. A fifth of those with £75,000 to £100,000-plus to invest want to invest but are holding back to see the outcome of Brexit. For EIS providers, Brexit has not stopped them from finding investable opportunities but in order to source these, they must have strong connections. Tony Stott, Chief Executive of Midven, which invests in early-stage, technology and SME companies primarily based in the West Midlands, says the company’s local focus means it has built a reputation. “We’re local, we’ve been here for 25 years,” he says. “We get a steady flow of enquiries, that’s been enhanced over the last six months. We run the new institutional fund, and that’s come with a whole new marketing budget. “We’re drawing in a lot of deal flow from that. It’s more how we choose the companies. Companies come to us all the time.”
He says companies come to them for investment but Midven also searches out new investment opportunities. “We go to innovation centres and science parks around the area,” says Stott. “Other people don’t go there so we find better deals. There’s a lot going on in Birmingham. Students used to move away but more are staying.” Andrew Aldridge, Head of Marketing at EIS provider Deepbridge Capital, says that connections are key to finding investments. “Most deals come to us through our connections,” he says. “Again, being sector specific, in terms of the technology and life sciences sectors, we are renowned in those sectors. “Our Head of Life Sciences [Dr Saavas Neophytou] is renowned in the market. Everyone knows him, and a number of our companies came to us as they want his mentoring.” He adds that on the technology side, Deepbridge Capital team is well-regarded. “We have other people in our team and on our board who are well connected globally,” says Aldridge. “If a company requires global scalability then having access to Deepbridge’s international team is a massive bonus.”
While there is clearly stock market nervousness about investing in the UK, over a quarter of affluent investors feel more encouraged to invest in UK SME opportunities as a result of Brexit, while 18% are holding back until after Brexit
GB Investment Magazine · October 2018
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Watch your back in an expanding EIS universe Advisers, and their clients, have more investment options than ever but this means there are also more pitfalls The expansion of EIS options and the ways in which to invest in them mean that advisers have to be increasingly careful about their due diligence and avoiding any potential pitfalls, but the real key is education. Robert Clark, Managing Director of independent financial advice firm Newstead Clark Financial Services in Birmingham, says that he is comfortable talking to clients about the options available to them through EIS investments. Although he believes technology is increasingly easy to talk to clients about due to its ubiquitous nature, he says that as long as he has done his own due diligence on the sector or fund, he is happy to discuss complex themes with them. However, he says “I’d want to do research for due diligence” to ensure all bases are covered. Talon Golding, Co-Founder and Director of private equity firm Novo Ventures based in Birmingham, which describes itself as ‘venture builders’, says advisers should look at geographical metrics when assessing EIS opportunities alongside sector analysis as key locations can offer significant long term growth potential for young companies. “However, it’s all down to the individual client,” he says. “What’s right for their risk profile and individual circumstances.”
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Novo Ventures focuses on its home city of Birmingham, and Golding says “being local” enables them to truly support growth for their clients and advisers should consider that “proximity of portfolio companies is a key factor in determining how hands-on a fund manager is”. “A regional strategy doesn’t mean you lose diversification, an EIS fund can invest across key sectors within a geographic area which they are experts within,” says Golding. “With Birmingham, it’s going through a renaissance. There’s more opportunity here now than at any time since the industrial revolution. It’s an incredible place to grow a business and as such there is a significant pool of EIS opportunities for savvy investors to target. It’s the youngest major city in Europe – a key economic driver for long term growth and prosperity for a geographic region.” He adds that Birmingham is home to the new UK headquarters of HSBC and there is “a lot of talent coming out of our universities and relocating here”. “Students and professionals are seeing Birmingham as a place to live and stay, not as a pit-stop on their journey” says Golding. “For EIS investors, there is merit in looking at a city with a lot of growth and a regional strategy whereby you can have an impact on those companies.”
Round Table
A regional strategy doesn’t mean you lose diversification, an EIS fund can invest across key sectors within a geographic area
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The client journey Whatever, geography or sector advisers choose for their clients’ EIS portfolios, Golding says: “The real work starts when the investment is made; you have to look after them, make sure they deliver on their objectives.” Each individual investor will have a different “journey” depending on the types of companies they want to invest in, their tolerance for risk, and what they want to get out of their investment. David Lovell, Operations Director at Growthinvest, a platform that provides access to tax efficient investments, says the company is unique in that it has “a mixture of underlying single companies”. “The journey varies for the individual, but if we’re looking at investors, they often seem to be attracted by an initial investment proposition, but as we track their journey they look around, and find out about other opportunities,” he says. In order to assist those clients in finding the right investments for them, Lovell says the platform is in the process of building up the education content on the site. “We’re building up more video content,” he says. “We see some people who know what investment they want to make, but we definitely see people come on to familiarise themselves with the environment and use that as a basis for research.”
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have links to independent research reports where we’re able. We also know that people want to get a feel for the company or the fund manager. “We’ll get interviews with the fund manager, their Twitter feeds, so [investors and advisers] can engage.” He says there’s a variation in the market due to the volume of investments, and “one can do more in an online environment”. Lovell believes that despite the shift online and the engagement, research, and education opportunities available through the digital world, sadly the investment industry has not kept pace in a practical sense. “That’s what we firmly believe the market needs to improve on; the digitisation of investments and the customer journey in this space is very important,” he says. “You might invest in high-tech companies and talk about blockchain, but you still need to do a wet signature on the form. There’s been quite a bit of good momentum led by the EIS association to address that.” Encouraging investment Digitisation of the investment process would go a long way to helping people invest, not just in tax-efficient investments, but more generally. However, there are somethings that need to happen to encourage investment in EIS.
While Growthinvest does its own research on the investments on offer, Lovell stresses that it does not undertake in-depth research and both advisers and investors need to ensure they are educating themselves before investing.
Richard McCaughan, Chartered Financial Planner at Chartered Financial Solutions, a Leamington Spa-based financial advice firm, says “basic knowledge” and “research” would help both advisers and clients feel more comfortable.
“We will always do a amount of due diligence platform,” he says. “[But] not a research house, so
Fellow independent financial adviser Clark says he has invested a few clients in EIS and “due diligence is important” as is diversification.
certain on the we are we will
GB Investment Magazine · October 2018
“Don’t put all your eggs in one basket,” he says. “They need to spread money about.” For Clark, the move to digital signatures is less of a concern due to the age of his clients. “The digital thing, while it’s important, older people are still more comfortable with writing a cheque out,” says Clark. “I don’t think digitisation is as important as explaining charges and managing expectations.” Charges are always a sticking point within the fund management industry and EIS is no different. Lovell says EIS charging is not uniform. “There is a lot of variation across the market,” he says. “It’s quite unclear, even to those within the industry, you have to look through and read the small print. There are different ways that charges are applied. Some are obvious.” The key information documents that funds have to provide clients mean “there is a need for everyone to be as transparent as they possibly can be when they say what their charges are”, adds Lovell. Andrew Aldridge, Head of Marketing at EIS provider Deepbridge Capital, says there is a “cost to raising funds” that has to be paid for. “We charge a fee to the investee company, but we don’t charge the investor a fee,” he says. “The only fee charged to the investor is a potential performance fee on exit.” Aldridge says he was “appalled at the lack of transparency” in fees a few years ago but believes the industry is changing for the better. “Sometimes you didn’t know what managers were charging or who they were charging,” he says. “The industry has made strides over the last few years, and now the sector as a whole is much more transparent.
Round Table
“We make it clear what we charge investee companies and the only fee we charge the investor is a potential performance fee on exit, which is ultimately how we make money. Our management charges to the investee companies keep the lights on, but to make money, it’s exit and performance fees which are aligned with the investors’ interest. “We think that is the most transparent way of doing things.” Tony Stott, Chief Executive of Midven, which invests in earlystage, technology and SME companies primarily based in the West Midlands, says his company “rolls up our annual fee so we charge on exit”. Opportunities abound All the providers currently have a number of investments in the pipeline, including a number in the technology space, which is a popular sector for EIS investment. Stott says he looks for companies with “recurring income”, which includes a number of software and services businesses “that sell on recurring income”. “We have a business which is currently developing a flat antenna to go on top of moving vehicles, which is on the way to becoming a unicorn,” he says. “We [also] have a company which is in the shared virtual reality (VR) space. Most people are aware of VR headsets, which you put on and you can walk through scenarios; the company we are involved with can take that content and put it in a dome, so people can stand in it and share that content. We’ve also signed a contract with Uber.” He says Midven has “various companies” in the portfolio and although the company is not explicitly technology focused, “a lot of it is tech”.
“We’re focused on recurring income and early revenues. Companies that are doing something now, that’s been tested in the market,” he says. Aldridge says Deepbridge Capital does not discriminate in the types of companies it invests in but they must all be “companies that are globally scalable” in order to maximise the growth opportunity within them. “If someone came to us with a company that would work in the UK but not in other markets, we wouldn’t be interested,” he says. “We’ve got a VR software company, we’ve got medical technology ie cancer diagnostics, deep vein thrombosis treatment, real estate analysis software, a company that produces Omega3 from freshwater algae, companies that are looking at new drug delivery techniques - a whole array of technology and life science focused companies.” When investing in companies, it is not just about throwing cash in their direction but broader support at board level and through connections, and in a global workplace those connections are more important than ever. “What we look for is the ability to support [companies] with more than just cash,” says Aldridge. “[That means] commercial support, board expertise, opening doors. Our companies have distribution commercial deals in over 35 countries, with products being used in over 190 countries. A lot of early-stage business don’t necessarily know how to open international trade doors and therefore we need to be able to offer support and guidance. “That’s an example of how we add value.”.
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EIS appeal: investment plus tax a winning combo Investing in EIS is no longer just about the tax breaks, with advisers and clients waking up to the investment appeal as well as the tax treatment
The appeal of private investment is growing and investors are now seeking out tax-efficient investments like EIS for the investment opportunities as much as the tax boost. Paul Wilson, Chairman of IFA Magazine Publications and former wealth manager, says the appeal of EIS is changing, although many advisers and clients still focus on the tax breaks on offer. “Traditionally it was a tax-driven investment,” he says. “You looked at the number, and it was all about asset backing and minimising risk. My own experience was you spent 50 minutes on tax and numbers, five minutes on the [investment] proposition,” However, this way of thinking is now outmoded and he adds that “the focus is very much on getting the investment right and the tax breaks are there to support that”, especially as the government - which sets the tax breaks - essentially becomes a “co-investor” so “everything focuses on the proposition”. Private investment and angel investing was a niche industry but the advent of crowdfunding, the ability to invest online, and appealing returns has brought it fully into the mainstream. Crowdfunding platforms raised £218 million in 217, according to The Deal: Equity Investment in the UK 2017 by Beauhurst, showing the momentum for alternative finance and alternative investments. Andrew Aldridge, Head of Marketing at EIS provider Deepbridge Capital, says crowdfunding has made investment more accessible. “Early-stageinvestment opportunities are more accessible now through crowdfunding,” he says. “Investors should be very cautious when it comes to crowdfunding but it has increased awareness of the Enterprise Investment Scheme. We see more business angels, Dragon’s Den on TV, we see more in the media and investors want to be part of that journey.
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“We’re seeing more high-networth individuals who have money ‘to play with’, who want to invest via EIS. They want to invest back into UK business. We invest in technology and life sciences - they’re exciting sectors and investors want to share in the growth potential.” Wilson says that crowdfunding has helped individuals see the potential in private investment but he warns that although crowdfunding “has highlighted the idea” the problem is that “people have no idea what they’re buying” and there’s “no due diligence”.
but requires investors to put their money into even higher-risk and earlier-stage companies than EIS does. “I felt [SEIS] was too risky,” says Clark. “When I fill in an attitude to risk form, a vast number [of clients] are happier with the 30% than the 50% [relief]. “If I’ve got someone with £3 million to invest, they’d put £100,000 into a SEIS.” It isn’t just clients and advisers that still see tax as the main driver for EIS investment, providers are well aware of the appeal of the tax relief.
Instead he suggests that investors put “5% of [their] portfolio into this high-risk space, and for that you need credible businesses”.
“The tax reliefs are usually the driver,” says Aldridge. “Ultimately, that’s why the government offers such tax incentives.”
“You need good management and an exit strategy,” said Wilson. “It’s gone from pure numbers, now it’s about investment in [opportunities] that work well.”
Despite this, he says that the market is changing and there is a greater shift to the investment behind the tax relief.
Robert Clark, Director of independent financial advice firm Newstead Clark Financial Services, says the tax benefits of EIS is still “a driver, whichever way you look at it”. “[A client] says ‘I’ve got a big tax bill, what can I do?’, and you mention EIS and VCT...You have to manage expectations [but] that’s 30% of the driver,” he says. It is unsurprising that tax is still a large part of why clients want to go into EIS, as the tax benefits are fundamentally attractive. Clark says the 30% income tax relief that EIS offers is the right level to encourage investment. “You have to have 30% [tax relief], if it was 15% nobody would invest,” he says. “After charges, it is only 20%.” He says that EIS offers clients the chance to invest in the “safe end of the high risk” investment spectrum. However, he stays away from Seed EIS (SEIS), which offers income tax relief of 50%
“The market has changed over the last five to 10 years,” he says. “Five years ago it was a black box approach [to investing]. You’d invest with a big, well-known brand, [the money] would go into a black box, and you’d find that you’d get contract notes or tax certificates to tell you where your money has gone. “We were shocked people weren’t asking more questions.” He said Deepbridge Capital makes sure it talks to both advisers and clients about the types of companies it invests in. “Yes, tax reliefs might be the driver but once you have the tax reliefs, it’s about understanding where the investment is going and what it is doing,” says Aldridge. As more investors look beyond the tax treatment to the underlying investment, it is unsurprising that they are becoming more involved in picking sectors and projects that they want to make a personal difference in, and the same can be said for regional preferences.
Tony Stott, Chief Executive of Midven, which invests in earlystage, technology and SME companies primarily based in the West Midlands, says there was a demand-supply gap in the West Midlands when it came to investment opportunities. “Part of the reason for doing this is that in the West Midlands area, there’s a gap in the market for people investing in EIS,” he says. Stott says that HM Revenue & Customs (HMRC) figures reveal that there is a “demand for capital, and there are a lot of professionals willing to invest in these funds, they just don’t have access to a provider”. Talon Golding, Co-Founder and Director of private equity firm Novo Ventures based in Birmingham, which describes itself as ‘venture builders’, is also an investor in regional businesses and says that EIS investing works well for the businesses it deals with. He believes there has been a “change in sentiment” for investors whereby before “EIS opportunities were supported with an asset or had a clear path to exit” but now there is more of a focus on “growth companies with a solid business model and strong management team”. By investing regionally not only do investors/EIS funds get to put money into growth companies but they also ensure “proximity to the companies” to enable a truly handson investment strategy to help drive growth across the portfolio and maintain close relationships with founders. “These companies need a lot of support,” says Golding. “If you’re looking at a geographic region you know inside-out and companies literally on your door-step, it allows a manager to essentially become part of the team”. David Lovell, Operations Director at GrowthInvest, a platform that provides access to tax efficient investments, says that there is an
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element of investments being driven by the client and what investments they are drawn to rather than what the adviser says or timeframes. “There is an element of [being driven by the client] with this type of earlier stage investing, particularly with a regional basis as well,” he says. “Clients want to have a small part of their portfolio in something that is more tangible and that they can feel they’re a part of, and can point to and talk to their friends about. “It’s not the hobbyist investor, but it is still interesting and exciting to be supporting British, local companies. That’s something we find about the companies we have on our platform. Investors do like getting out and meeting them, visiting them, getting those updates.” While in the past investors were happy to follow the lead of an adviser and go into EIS for the tax breaks, as the emphasis on the investment behind the EIS grows, there needs to be greater education of the clients to ensure they understand the spirit of EIS investing and their opinions are not skewed by unfavourable headlines around some types of investment. Richard McCaughan, Chartered Financial Planner at Chartered Financial Solutions, a Leamington Spa-based financial advice firm, says advisers have to be careful about “the potential for [recommendations] coming back on you”. He notes that some large providers - that seem legitimate because of the big brand - have been pulled up in recent years for investments that HMRC was unhappy with. This isn’t the only concern, however, as he emphasises that advisers have a duty of care to their clients to make the right investment decisions for them. “It’s a compliance thing,” he says. “[It’s} the fear of thinking it might go wrong. It might only be 5% of someone’s money, but it’s still important.”
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Wilson says a number of IFAs have stayed away from EIS because they are trying to protect their clients from tax risk but “now EIS is mainstream...we’re trying to protect clients from investment risk”. And advisers have to be discerning about what they put client money into but they must also stay on the ball with the types of investments being offered, because if they’re not clients could be tempted to invest directly. “If you do due diligence as a single investor, you really need to know what you’re doing. The next thing you need is something that been checked upside down, inside out. It’s not just about getting the right investment, [clients] need to be schooled as they’re going through - if we don’t advise clients, there’s a risk that they’ll make those investment themselves.” Novo Venture’s Golding says there has been a “seismic shift” in the attitudes to EIS and the that shift has seen advisers looking to “quality fund managers” rather than just product providers. “[It is] about understanding the quality of investments rather than just the surety of tax relief,” he says. “It’s about looking at a manager who can do the due diligence, assess each company, and produce a portfolio against a set mandate.” In order to ensure their clients are in the right portfolio, being managed by a competent manager, due diligence has to be at the centre of the investment. Lovell says advisers need to take more care with their due diligence the further up the risk scale they go. “You want to find out what the client has appetite for, particularly going up the risk scale, there’s a definite need for diversification across portfolios,” he says. “If someone’s really keen on technology, and someone phones us up about technology fund managers, [you] want to encourage them to look at four or five and allocate to the funds.
“Where the risk goes up, that can be offset by proper diversification.” Local-focused funds are good for the local economy and can be good for investors but there needs to be awareness that hyper-local investment can leave investors exposed. “Definitely go into a local fund,” says Lovell. “But if that’s your only investment, that’s a lot of focus on the West Midlands economy [for example]. That’s more and more the conversation we’re having with advisers.” Whatever the risk scale of the investor and their sectoral or geographic preference, it is clear that advisers need to educate themselves and their clients about the tax and investment opportunities open to them via EIS. Wilson says that as EIS hits the mainstream “clients want and need it” and “if [an adviser is] not providing advice, [their clients] will find someone who is”. Lovell agrees that more advisers should be considering EIS and letting their clients know about this tax-efficient investment. “More people and investors should be doing EIS than are in the marketplace at the moment,” he says. “There are only 30,000 on an annual basis, and there are a whole load [of people] sitting [in] the higher income brackets that should focus on that.” For those who are worried about the risks of these investments, Lovell says this can be offset by diversification and the “growing infrastructure around this market” is making diversification easier so “there’s a lot of information out there [and] advisers should get stuck in”. Philip Thompson, Business Development Manager at Deepbridge Capital, says even IFAs who have been advising clients for a long time need to update their knowledge on this fast-paced investment sector.
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He says advisers should “not be afraid of it” and actively engage to “understand it more”. “It doesn’t matter how long you’ve been an IFA, you have to make sure you’re looking at the whole of market for them,” says Thompson. Advisers also need to make themselves aware of the finer details around investing in EIS, which do differ from standard fund investment in terms of payouts and timings. Aldridge, also of Deepbridge Capital, says that advisers need to understand the fund managers and “how quickly they deploy funds”. “Once you’ve established credibility and quality, advisers should be looking at how quickly funds are deployed. Some managers state that it could be up to two years before they deploy funds, so that’s an extra two years added your exit prospective exit timescale, as well as a delay to claiming any potential tax reliefs,” he says. By understanding the deployment and timescales of EIS investing, advisers can ensure they give clients the full picture on how long they will be invested for and when they are likely to get their money back. McCaughlan says he would like to see EIS portfolios pay out monthly instalments, a move that would be helpful to older investors who are potentially using their investment income to live on. “If there was any way that monthly money could be paid, that would be great, so £5,000 a month rather than £60,000 a t the end of the year means better advice and more considered investment,” he says. Lovell says GrowthInvest is currently looking into monthly payments to see how viable it is. “We’re speaking to a couple of payroll companies about exactly that,” he says. “So pension and EIS [income] could come out at the same time. There’s a big drive in the market [and] there’s no reason there should be a focus on first quarter as a time for investment.”
Whatever the risk scale of the investor and their sectoral or geographic preference, it is clear that advisers need to educate themselves and their clients about the tax and investment opportunities open to them via EIS
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M AGAZINE
ROUND TABLE VCT LONDON
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Round Table
Participants VCT Round Table, London Paul Wilson
Chairman | IFA Magazine Publications, Clifton Media Lab E: Paul.wilson@ifamagazine.com
Alex Sullivan
Managing Partner | IFA Magazine Publications, Clifton Media Lab E: Alex.sullivan@ifamagazine.com
John Glencross
CEO and Co-Founder | Calculus Capital W: www.calculuscapital.com
Claire Olsen
Director, Head of Marketing and Investor Relations | Calculus Capital E: Claire@calculscapital.com W: www.calculuscapital.com
Dennis Coleman Cert PFS Independent Financial Adviser
David Golding DipFA
E: readingfs@msn.com
E: davidgolding@charterhallassociates.com
Financial Consultant
Jeannette Cottrell CFA
Chartered FCSI, Investment Manager | Tilney Investment Management Services Ltd E: Jeannette.cottrell@Tilney.co.uk
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Coming of age: how to make the most of VCTs VCTs are shedding their reputation as a high-risk, speculative investment and advisers need to ensure they are looking at this asset class for their clients VCTs have ‘come of age’ and are not only providing value for money for taxpayers but attractive investment returns. VCTs were introduced in 1995 by John Major’s Conservative government, and under the direction of then Chancellor Kenneth Clarke, and in that time there has been myriad changes to the rules and investor reaction to this type of investment. Although the reputation of VCTs has improved, there is still some scepticism in some quarters. David Golding, an independent financial adviser at Charterhall Associates in Essex, says there are some advisers that will not recommend VCTs. “Although [the investment sector has] got better, there is good and bad, and there have been a lot of bad investments in the past,” he says. While it may have taken a long time for VCTs to hit the mainstream and shake off a reputation that has seen many deem the investments as too high risk, John Glencross, Chief Executive and Founder of VCT and EIS provider Calculus Capital, says they have come into their own. “VCTs [were] introduced almost 25 years ago [and] have come of age as an investment class,” he says. “There are some sensible investment managers managing VCTs. It’s true to say that there
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has been change since they were introduced, and very significant changes in 2015 and in the last 2017 Budget. However, the leading VCTs have shown a capacity to adapt to changing legislation when it happens.” Glencross says that pre-2015 most VCTs were invested in “management buyouts (MBOs) and management buy-ins (MBIs)”, and “financial engineering was a large element of the returns - there was a large debt element built in”. However, the 2015 Budget ended VCT’s ability to do MBOs and MBIs, which Glencross says was “a large change for [the VCT industry] to work through”. “[VCTs] investment teams were more familiar with MBOs than growth investing, there are different skills [involved],” he says. There were more significant changes to come in the 2017 Budget due to concerns about whether VCTs and EIS, which are given generous tax breaks to help drive the UK economy were actually investing in and supporting growth companies. “There was growing unhappiness in the Treasury with what they felt was misuse of the tax benefits,” says Glencross. “Very significantly in EIS, they said two-thirds [of the money invested via EIS] was directed towards capital preservation, and that’s not what they felt it was about.
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“But they also felt VCTs were not abiding by the spirit of the legislation. They then introduced requirements, which now focus VCT and EIS investment on growth investing.”
“It has not had a particular impact on us, but the VCT industry is having to face changes, greater scrutiny, and while there are benefits to the economy, there are new challenges to VCTs.”
Glencross says the Treasury is “very focused on value for taxpayers’ money”, particularly under the current Chancellor Philip Hammond, which is why he has introduced the principle-based test that requires VCTs and EIS to ensure they are investing for growth and in growth companies.
Regardless of the rule changes around VCT investments, they still remain attractive and have benefits to clients’ portfolios.
VCT managers also have to invest money raised faster; 30% within the first accounting period following the period in which the subscription was made. “There is an onus on VCTs to put the money to work, which is especially challenging for VCTs with large amounts of money,” says Glencross. “The challenge for VCTs going forward is to achieve the same level and consistency of returns from growth investing that they were achieving from smaller MBOs and MBIs.” Although there are challenges ahead, Glencross is confident that VCTs can “accommodate the changes”, but admits that some VCTs “for which the challenges are greater”. “At Calculus, we have always been growth investors, as we started out as EIS investors,” says Glencross.
Jeannette Cottrell, Associate Director at financial planning business Tilney Group, says that the upfront income tax break of 30% is of particular benefit to clients, “especially given the limits on ISAs, and then the £1 million [lifetime allowance] cap on pensions”. She adds that buy-to-let investors have also seen the wind taken out of their sails as they have had the ability to claim tax breaks on mortgage interest removed, adding to the list of investors looking for a new home for their money. Cottrell says VCTs are offering “an attractive income stream” with an “average yield of about 4.5% tax-free”. “Then, you have an investment... where historically the results, at least in the last five years, have been good,” she says. “People are seeing [VCTs] in a different light. It looks like a safe investment, the returns are better.
Those types of returns attractive. Capital gains are free, no implication income, upfront tax break, which you have to hold for five years.”
are taxand only
Glencross said a 4.5% taxfree yield is “significant” but unfortunately for investors whilst there have been new issues by existing VCTs, there have not been any new VCTs to invest in over the past five years. “It’s interesting why there have been no new VCTs for five years, it’s because they can’t pay dividends immediately,’ he said. “Compare that with an EIS, the drivers for EIS are that you get income tax relief, inheritance tax is a relief that you can capture through EIS, but also, capital gains are tax-free, and it’s easier to realise than a VCT in a way. Also there is the capital gains deferral, and attractive loss relief support – for EIS the inheritance tax relief is quite the driver.” The nuances and differences in tax treatment between EIS and VCTs are still misunderstood by both advisers and clients, which is why education about tax-efficient investments is so crucial. “It comes back to education, helping [people] to understand how these tax-enhanced investments work,” says Claire Olsen, Calculus Capital Head of Marketing and Investor Relations.
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To me, they are no different than an ISA; it’s something somebody should have, it just depends how big [a part of the portfolio] it is.”
Education could help dispel the stigma that is still attached to alternative investments, of being purely high risk and speculative, and only useful for the tax breaks they offer, not as a viable investment in their own right.
Glencross says that it is important that advisers and investors “understand the nature of the investments” they are putting their money into, whether that is a FTSE tracker or a VCT.
Golding says that “people perceive them as being higher risk” and there are some advisers out there that refuse to participate in EIS or VCT raises. “Whatever [advisers] put into high risk environments, that’s going to reduce the amount of money they’re putting into funds,” he says. “More work, more risk, more paperwork. Firms won’t do it - it will be a big culture change to switch across” However risky alternative investments may seem to some clients, and advisers, the restrictions on pensions which have seen annual and lifetime allowance whittled down to £40,000 and £1 million, respectively - mean that more high-net-worth clients are at the pensions limit and looking for new, tax-efficient homes for their money. “Pensions are problematic,” says Golding. “It’s a shame, because we tell people to make enough provision for their environment, then restrict them.” Lack of education may not be the only reason why advisers are not recommending VCTs, they may feel their ability to advise on alternative investments is hampered by external regulatory and insurance pressures, particularly the cover offered under their professional indemnity (PI) policies. Tilney’s Cottrell refers to a document published by the Association of Investment Companies (AIC), which is the trade body for closed-ended, listed investments such as investment trusts and VCTs, that says advisers are concerned about PI.
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“They mention that a lot of IFAs don’t offer VCT advice because they have to mention it, and it drives up their insurance,” she says. “You have to assess how viable offering this service is…you do feel it has an impact on whether they can be truly independent or are restricted.” Glencross says that advisers have to ensure they are able to talk to clients about VCTs and offer them options as the more this type of investment moves into the mainstream, the more clients will ask about them. “People read about [VCTs}, and they’re asking their advisers about these investments, so you have a potential tension if clients are interested and advisers are not able to take care of them in that respect,” he says. “It’s a difficult position for an IFA to find themselves in.” Paul Wilson, a former wealth manager and Founder of IFA Magazine publications, says the interest “reflects that [VCTs] are now seen as a mainstream investment”. “I had a healthy scepticism in the past, but now they are activity-led, and the tax breaks support that, rather than them being tax breakdriven,” he says. “The underlying performance is the thing, and that has changed.
“It’s important not to take for granted what’s going on under the surface, and that you understand the nature of investments,” he says. “The way the environment is changing too, that might have an implication on returns and the nature of fundraising.” In order to understand what is going on under the bonnet of an investment and ensure that all implications are understood, the adviser has to be able to engage with the fund manager. “It’s very important to be comfortable with who’s managing the money,” says Glencross. “The VCT community is mature, we can take comfort from that, there are changes taking place and they are likely to feed through to smaller fundraisers going forward.” But advisers will have to understand VCT offerings and move quickly to invest their clients as smaller raises - caused by the need to invest VCT money more quickly - will mean there will be less capacity in the VCT universe. “You might find that your preferred fund won’t have the capacity,” says Glencross. “Those that have the biggest marketing models and budgets are not necessarily the ones to select. “Look at what the manager is doing, look under the bonnet, look at how much they disclose in their documentation, because I think some of the perceptions of risk are not wholly appropriate now for the right investor, but it’s important that the adviser and the investor understand what the manager is doing with their money.”
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Look at what the manager is doing, look under the bonnet, look at how much they disclose in their documentation, because I think some of the perceptions of risk are not wholly appropriate now for the right investor
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VCT returns under pressure The government’s new investing rules will change the way VCTs invest and reduce the scope for raises and returns in the industry
The government’s new rules around VCT investing are placing tight investment timescales on VCTs and restrictions on types of investment they can make which could mean returns may not be as high as they once were.
However, the bumper inflows may be coming to an end due to the government’s new VCT rules that demand VCT are focused on growth not lower risk investments and that money raised is deployed quicker than it was before.
The amount of money flowing into VCTs in the 2017/18 reached a record £728 million, according to figures from the Association of Investment Companies, with a few investment houses registering mammoth raises over the period.
This means that companies are unlikely to continue with large scale raises, preferring instead of raise smaller amounts of money that they know they can invest under the new rules in the newlytightened timeframes.
The fact that companies can no longer make lower risk MBO and MBI type investments, that typically pay out a steady income stream and are fairly reliable, and must instead put money into pure growth plays, which are more volatile, could mean that returns are lower and more variable
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VCTs are now required to invest 80% of funds, rather than 70%, in qualifying companies, and 30% of the funds raised must be invested by the end of the first accounting period following the one in which the fundraising took place. The fact that companies can no longer make lower risk management buyouts (MBO) and management buy- ins (MBI) type investments, that typically pay out a steady income stream and are fairly reliable, and must instead put money into pure growth plays, which are more volatile, could mean that returns are lower and more variable. Older VCTs have also lost their ‘grandfathered’ status, which means they can no longer operate under previous rules and are also pushed towards being growth investors, and VCT managers are now in effect all fishing from the same pool of investments. John Glencross, Chief Executive and Founder of VCT and EIS provider Calculus Capital, says it will be more challenging for fund managers to invest the money they raise. He says that all VCT providers will now be “in the same pool”. “There are more looking for the same type of investments than before; you have VCTs, EIS investors, and other small non-tax advantaged funds in the same area, all looking for growth,” he says. “I think the challenges for VCTs are that they have had to move from being MBO investors to growth investors, which has required a change of investment strategy and skill.” The change in skills may mean that a VCT’s historic returns are less relevant as managers can no longer rely on the investments that they are used to picking. “The performance put forward may be based on a set of investment rules that may no longer be appropriate,” says Glencross. “If
you look at those VCTs which previously invested in both MBO and growth investments, in the MBO and MBI investments historically they were delivering higher returns and lower volatility in thier MBO investments than in their growth investments.” However, he said this consistency is not translated into growth portfolios as easily due to the more volatile nature of growth investments. “In growth investing, their overall returns are probably slightly lower, and there is greater volatility,” he says. “It means now that VCTs are likely to not necessarily deliver the returns they’ve earned before, although they get good returns within the market, and VCTs by and large know what they’re doing. “The VCT sector is looking at good returns, but not as healthy as the past few years, although we have had a buoyant economy.” Growth portfolios will by their nature be more divided into winners and losers, says Glencross. “If investors look at returns, they might have to get used to the fact that there are more marked winners and losers in a growth portfolio than was hitherto the case,” he says. “In looking at VCT share offerings now, it’s important to look at where the returns have previously come from, and to take a view of what life may be like going forward.” The changes to the investment timeframe means that VCT fund managers have to work harder to put money into a smaller pool of investments more quickly, and as the pool is smaller there is a good chance that sectors may become crowded and subsequently returns will diminish. “Everyone is investing in a smaller pool and the government is saying you have to put more money to work faster. I think it is likely to put pressure on returns,” says Glencross.
“It means there is a challenge that VCTs will now have to face, to work harder, and to probably put more into being growth investors in order to deliver commensurate returns to before. More money being put to work in general, and faster, means that within the investment universe there are area which are starting to get a little overheated, and areas in which there are opportunities.” Glencross says the key to investing in the right VCT, as with any investment, is to “look under the bonnet” and “don’t take what has been the case as a given”. “I would caveat that by saying that there are experienced and skilled VCTs [managers] who are capable of finding their way through the challenges of the changing environment. It’s important to look at what’s going on in the engine room,” he says. Looking under the bonnet of an investment may be difficult for advisers working independently, but Jeannette Cottrell, Associate Director at financial planning business Tilney Group, says they have a dedicated VCT research team and write substantial VCT execution-only business. “[The team] goes out and does the underlying research, so when clients go onto our website they can print out a factsheet,” she says. “They have to do a questionnaire with qualifying questions. Hargreaves Lansdown do this as well, and others. We know our top picks as a company. The research team has good relationship with the various VCT managers.” This also means Tilney knows who is coming to the VCT market and they organise teach-ins for the planners and investment managers. “Normally, we do VCT work from November to April, along with the tax year, but this year we’re starting it earlier, in September. We think some long-standing VCTs will come to market with top-up offers,” says Cottrell.
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We offer VCTs via our executiononly service and they attract a 5% initial charge which can be rebated back to the introducer and subsequently the client, and there is an underlying trail commission “typically 0.5% ”. “If you are an existing investor you get a bigger discount on the initial charge, and there are opportunities to buy in on the secondary market, so when you buy a significant size on the VCT you get that extra rebate,” says Cottrell. However, Cottrell says Tilney are “expecting competition” in the VCT space as making VCT investments becomes more challenging. “The supply is going to go down, VCTs are going to come to market with smaller tranches, and the demand is going to continue to go up, and that’s why we’re doing it earlier,” she says. “We want to be ready for when the top-ups come to market.” Glencross is not sure top-up raises will even need to come to market for new investors as they could be filled by existing investors.
“I think some VCTs have done the fundraising before 6 April 2018 because certain rules would hit afterwards,” he says. “It may be that people are coming back with £10 or £20 million, and it’s likely to be filled up with existing investors without going up in the market, the demand-supply equilibrium is going to be tighter.” It is not just Tilney that is getting an early start on VCT season, David Golding, an independent financial adviser at Charterhall Associates in Essex, says he is already talking to a number of players in the market. “The thing I really like about the industry is that they aren’t necessarily all going to have great ideas all the time; it’s refreshing that they will say you can get a lot of ideas by discussing with others in the marketplace,” he says. “If they don’t have the capacity to take your money, they would rather it went somewhere where it would do OK.” Glencross says that this should be more the case moving forward, with money shared more equally among managers as their raises are smaller.
“My observation is that there have been managers who are quite happy to take as much as possible on the basis they will put it to work,” he says. “That should change, and it will change. VCT managers will only raise what they feel they can employ, they don’t want to impact their ability to provide good returns.” He says although all managers say they can continue to find opportunities, those who have raised more money will find it harder to invest. “VCTs have not traditionally paid big dividends when they have made exits. It’s going to be interesting for a few years to see if VCTs pay larger dividends when they have a good exit. My view is that you shouldn’t necessarily look to who raises the most, but for who might be sensibly carving a position in the market and might have an appropriate deal-flow. “It’s not always those who shout loudest who deserve the most attention.” The VCT industry will also be limited by its “incredible consolidation”, says Glencross, which he described as “sad”. “You need to keep the industry fresh, but there are no new entrants,” he says. “I don’t think size is necessarily a wonderful benefit. I think it may be that size can start to be an impediment, although if you are big, you are obviously well-established.” One other issue the VCTs will have to contend with is greater scrutiny of fund charges, something that is being looked across all investment asset classes. There are two different types of VCT charges, one that charges the company an investment fee and others who take a fee from the deal value. Glencross says the management fees are around 1.5% to 2% a year and the high charges are because VCT investing is “not like picking a set of investments from the Euro Top 500”.
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GB Investment Magazine · October 2018
Round Table
You have to proactively work with it to make it successful, both to take out unnecessary risk, and to capture as much upside as possible
“This is real investing, both finding good investments, and doing your due diligence, documentation, everything,” he says. “We all talk about making investments, it takes five years to see a growth investment deliver value.” He says he banned the word ‘monitoring’ at Calculus as “you cannot monitor a growth investment”. “You have to proactively work with it to make it successful, both to take out unnecessary risk, and to capture as much upside as possible,” he says. “Most managers will take a fee from the deal total, which is a private equity industry norm. When it’s taken from the company; if you are taking a 30% investment in a company with good growth prospects, the other shareholders are unlikely to be willing to pay your deal fees in that, and therefore you are in danger of not getting access to the best opportunities. “Also, generally, people that do are investing in smaller investments and are taking a larger stake and make the company pay.” “It doesn’t matter whether it comes from the company or the investment total, it’s essentially all the same pot,” says Glencross. “Other fees are fine within reason and are industry parameters. You can’t equate this with a form of investing with quoted equity funds which, essentially mirror the FTSE index, this is real investing.”
GB Investment Magazine · October 2018
39
Healthcare and tech taking VCTs by storm Investment managers are seeing ample opportunities in the technology and healthcare sectors, using them as a way to diversify client portfolios Healthcare and technology investing are the two areas making waves in the VCT market, helping advisers to diversify client portfolios across sectors. The government has been keen to ensure that tax breaks given to alternative investments like VCTs are being used in the way they were intended, to boost the economy and drive growth. John Glencross, Chief Executive and Founder of VCT and EIS provider Calculus Capital, says the government wants tax advantaged investment to back entrepreneurs.
Cottrell says the healthcare sector offers a number of opportunities but when mentioned to clients “quite often the blood pressure goes up”. Glencross said “There is a range of investment models, such as the drug discovery model, which can have incredible returns but is high risk, and then companies that are providing services to big pharma companies,” The UK is also a leader in the bioscience and life-science sectors.
“The government is very keen to point out that it’s about backing entrepreneurial companies not capital investment [that is] low risk,” he says.
“In bio-science, within our portfolio we have companies that measure certain chemicals in the air, which is used by engineers and ports,” says Glencross.
“They were quite determined in wanting capital to flow to young growing companies; it’s about backing an entrepreneurial economy, not just a science economy, and it’s important for investors to understand that for a diversified portfolio.”
In terms of healthcare investments, through Calculus Capital, Glencross has invested in a diagnostics company that can diagnose Hepatitis C in 50 minutes, not in a laboratory.
Glencross says the interesting companies are using technology in a way that is not too disruptive but to “produce a service that is already established in the market, in a more efficient or global way”. He quotes a company in Reading, that is providing human resources planning services through their
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hosted servers, from New Zealand to California,”.
GB Investment Magazine · October 2018
“100 million people suffer from it in Africa, and there is now the ability [to test for it] near the point of infection, in 50 minutes, with the same accuracy as it is done in a big laboratory,” she says. He says companies that cross healthcare and technology are of particular interest, highlighting Horizon Discovery, in which Calculus were early investors.
Round Table
“It provides services to research institutions, the founders thought they had founded a technology company, but it was really a healthcare company,” he says. Glencross, who is an investment manager, says he is “always looking for themes” in which to invest - especially the business of personalised medicine - and technology, specifically internet services, automation and integration, are “standout” areas. Claire Olsen, Head of Marketing and Investor Relations at VCT and EIS provider Calculus Capital, pointed to a speech by Prime Minister Theresa May that impressed the point that the UK is “very rich and very lucky” that we have strong businesses. “She mentioned technology and healthcare as being two of those industries,” says Olsen. “We don’t know what will happen with Brexit, but there’s something about helping these businesses grow and evolve, and it’s a very interesting time to get involved with EIS and VCT. “It’s definitely something more and more people are becoming aware of, there is more information provided by the government, publications, and providers.” The government and providers may see the benefits in driving healthcare and technology in the UK but advisers also need to convince their clients that these high-yielding, but admittedly risky sectors, are worth investing in. Some clients are more easy to persuade than others depending on their personal circumstances and interests. David Golding, an independent financial adviser at Charterhall Associates in Essex, says he has a number of clients who are doctors and “healthcare is up their street”.
They are also a good bellwether to judge the validity of an investment, he adds. “If they like the idea they will sell it to their colleagues,” says Golding. He adds that “there will be fewer options of where to put your money” in future and “it’s going to be hard work to find lots of investments”, so passing an investment ideas is important for investors and providers. Glencross says VCTs do offer diversification within their portfolios and “having a larger portfolio is a benefit to investors and comforts advisers” as “markets are continually moving, they never stay the same”. While healthcare and technology are popular and interesting areas, they are highrisk and not without their pitfalls and Glencross says “I’m seeing a bit of overheating in some areas of technology”. “Things like fintech is getting very overheated,” he says. “I think we will see a fair amount of capital lost there; we remember the tech crash of 2000.” He adds: “Within technology, it’s about doing established things business services - but better, faster, and cheaper. “We are incredibly rich in bio and life sciences...we are an ageing population, we aren’t necessarily growing healthier; one in 20 children at primary school is clinically obese. We’re going to have huge healthcare requirements going forward.” Cottrell adds that the starting point for a conversation with a client around VCTs isn’t the tax advantage, but “looking at their willingness and their ability to tolerate risk, and then look at VCTs again from there”. “They warrant a place in a diversified portfolio,” she says.
GB Investment Magazine · October 2018
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GBI OPEN OFFERS The power to invest through GrowthInvest
EIS Open
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Amount to be Raised: £20m Minimum Investment: £50,000
Calculus Capital EIS Fund Pioneers of tax efficient investing, Calculus Capital created the UK’s first approved EIS Fund in 1999. Our 18 year track record of investing in growing UK companies assures investors of our ability to make sensible investments capable of delivering excellent returns at every stage of the economic cycle. Calculus has won multiple awards, including the EIS Association’s ‘Fund Manager of the Year’ in February 2017, the fifth time the firm has been awarded the accolade and more recently was awarded Best EIS Fund Manager at the Tax Efficiency Awards in December 2017. Calculus are recognised as having an incredibly robust investment process and an active portfolio management style - which has led to an impressive track record of successful exits. The Calculus Capital EIS Fund focuses on established companies with growth potential, across a diverse range of sectors. An investor can expect a portfolio of 6-10 companies with the following characteristics: • The ability to achieve our target IRR of 20% • Experienced management teams • Successful sales of proven products or services • Profits or a clear path to profitability • Clear route to exit
T. 020 7493 4940 E. info@calculuscapital.com www.calculuscapital.com
VCT Open
October 2017
Close
31 July 2018
(2018/19 tax year)
Amount to be Raised: £5m Minimum Investment: £5,000
Calculus’ investment strategy is exit led, with a key focus on delivering strong returns to investors. The 18 month investment programme commences after relevant closing date. The next close is taking place 29 June 2018. Calculus value their reputation for client service as much as their investment record, and are focused on building long standing relationships with both clients and advisors. Please get in touch to find out more on 020 7493 4940 or info@calculuscapital.com
Calculus Capital VCT Pioneers of tax efficient investing, Calculus Capital have a strong track record for investing in established, unquoted SMEs. Our experienced investment team and thorough investment process have produced impressive dividend performance and exit returns for investors. By co-investing in selected established companies through both VCT and EIS, we are able to choose larger companies and bigger deals – reducing the risk profile of the investment. The Calculus VCT has the following characteristics: • Targets an annual dividend of 4.5% of NAV • Income tax relief of 30%, tax-free capital gains and dividends • Diversified portfolio, targeting 30 qualifying companies • Share certificates issued 10 days after allotment • Allotments available in both 2017/18 and 2018/19 tax years • Monthly standing order option available • Target 5% discount in respect to share buyback after 2020
T. 020 7493 4940 E. info@calculuscapital.com www.calculuscapital.com
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The top up offer will be used to both invest in new companies with growth potential and provide further funding to a number of portfolio companies. Calculus value their reputation for personal service as much as their investment record, and are focused on providing an excellent client experience. Please get in touch to find out more on 020 7493 4940 or info@ calculuscapital.com
GB Investment Magazine · October 2018
Open Offers
EIS Open
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Evergreen
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Amount to be Raised: N/A Minimum Investment: £25,000
T. 01865 860 760 E. info@oxcp.com www.oxcp.com
BPR / IHT Open
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Amount to be Raised: N/A Minimum Investment: £25,000
Oxford Capital Growth EIS We will build a portfolio of shares in 12-15 companies for investors over a period of roughly 12-18 months. We invest in early stage technology focused businesses in the UK. We aim to access the best deals, invest early and keep backing the winners. Our current portfolio includes companies in sectors such as fintech, online marketplaces, digital healthcare, AI and machine learning. Recent investee companies include Push Doctor (online health), Moneybox (digital savings), Sn-ap (on demand travel app) and Wrisk (insurtech). Our experienced team works closely with investee companies, typically sitting on the board, helping to accelerate commercial development with the aim of achieving a profitable exit, usually through either a trade sale or a stock market listing. Each portfolio company should be eligible for EIS reliefs, including 30% income tax relief and taxfree gains.
Oxford Capital Estate Planning Service The Oxford Capital Estate Planning Service (OCEPS) can help investors mitigate Inheritance Tax by investing in companies that should qualify for Business Property Relief, subject to the requisite holding period. OCEPS offers investors ‘flexibility and control’ over their investment. Options include Capital Growth and Income. Target returns range from 3% to 5% p.a., and capital can be accessed within 1-6 months through the sale of shares. If an investor’s circumstances change, they can elect to switch to an alternative, more appropriate, investment option. Investors in the Estate Planning Service will acquire shares in unquoted holding companies. These companies will make equity investments in, and loans to, companies which in turn will own and operate revenue-generating assets. Currently the investment strategy is focused on small-scale power generating equipment, property construction and renewable energy assets. Over time, other assets will be added to the portfolio.
T. 01865 860 760 E. info@oxcp.com www.oxcp.com
EIS
(but occasional investments are not EIS)
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Amount to be Raised: N/A Minimum Investment: £25,000
Oxford Capital Co-Investor Circle Our Co-Investor Circle lets you build your own Venture Capital portfolio, by investing directly alongside Oxford Capital at your own discretion. The Co-Investor Circle is our network of sophisticated investors, who share our passion for supporting and investing in interesting businesses, with the potential for rapid value growth. Through the Co-Investor Circle, individuals and family offices can access investments in privately owned companies that would usually only be open to institutional investors, to build their own venture capital portfolio at their own discretion.
T. 01865 860 760 E. info@oxcp.com www.oxcp.com
When making their investments, members leverage over 60 years of venture capital experience, gaining comfort from Oxford Capital’s due diligence and selection process, and from the same institutional investment terms. After investment, members benefit from our strategic planning and operational valueadd to help manage their investment risk and enhance value. Typically we seek to represent investor interests through board seat representation. Co-Investor Circle members have invested over £60m in more than 30 companies. Recent investments have been in sectors such as fintech, online marketplaces, digital healthcare, AI and machine learning.
GB Investment Magazine · October 2018
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SEIS Open
January 2016
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Evergreen
Target Raise: £3m per annum Minimum Investment: £10,000
The Deepbridge Life Sciences SEIS The Deepbridge Life Sciences SEIS represents an opportunity for private investors to participate in a selected portfolio of early stage life sciences companies, taking advantage of the tax benefits available under the Seed Enterprise Investment Scheme. Providing seed investment to emerging companies operating in the life sciences sector, the Deepbridge Life Sciences SEIS seeks to fund companies with exciting new technologies that aim to satisfy the needs of large and growing markets. The Deepbridge Investment Team has a proven track record of working with emerging companies to create value for shareholders through a hands-on investment methodology. The Deepbridge Life Sciences SEIS is a manager fee-free SEIS opportunity at the point of investment for subscriptions received by a financial adviser. Upfront and ongoing manager fees are paid by the Investee Companies, potentially allowing investors to enjoy up to 100% of SEIS tax benefits. Please see costs and fees section in the Information Memorandum for full details.
T. 01244 746000 E. Enquiries @deepbridgecapital.com www.deepbridgecapital.com
EIS Open
March 2017
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Evergreen
The availability of SEIS tax reliefs depends on individual circumstances, may be subject to change in future and depend on underlying companies invested in maintaining their qualifying status. Investment in unquoted companies carries high risks and investors could lose the total value of their investment. Investments in SEIS can be difficult to realise. Past performance is not a reliable indicator of future performance. This financial promotion, directed at investment professionals, has been approved by Enterprise Investment Partners LLP (“EIP”). Deepbridge Advisers Limited (FRN: 609786) is an Appointed Representative of EIP, which is authorised and regulated by the Financial Conduct Authority (FRN: 604439).
Deepbridge Life Sciences EIS
Maximum Raise: Uncapped
The Deepbridge Life Sciences EIS represents an opportunity for private investors to participate in a selected portfolio of healthcare innovation, whilst taking advantage of the tax benefits available under the Enterprise Investment Scheme.
Minimum investment: £10,000
The Deepbridge Life Sciences EIS focuses principally, but not exclusively, on three sectors: • Biopharmaceuticals • Biotechnology • Medical Technology. The Deepbridge Investment Team has a proven track record of working with emerging companies to create value for shareholders through a hands-on investment methodology. The Deepbridge Life Sciences EIS is a manager fee-free EIS opportunity at the point of investment for subscriptions received by a financial adviser. Upfront and ongoing manager fees are paid by the Investee Companies, potentially allowing investors to enjoy up to 100% of EIS tax benefits. Please see costs and fees section in the Information Memorandum for full details.
T. 01244 746000 E. Enquiries @deepbridgecapital.com www.deepbridgecapital.com
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The availability of EIS tax reliefs depends on individual circumstances, may be subject to change in future and depend on underlying companies invested in maintaining their qualifying status. Investment in unquoted companies carries high risks and investors could lose the total value of their investment. Investments in EIS can be difficult to realise. Past performance is not a reliable indicator of future performance. This financial promotion, directed at investment professionals, has been approved by Enterprise Investment Partners LLP (“EIP”).Deepbridge Advisers Limited (FRN: 609786) is an Appointed Representative of EIP, which is authorised and regulated by the Financial Conduct Authority (FRN: 604439).
GB Investment Magazine · October 2018
Open Offers
SEIS Open
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Nov 2017
Evergreen
Target Raise: £3m per annum Minimum investment: £10,000
Deepbridge Innovation SEIS The Deepbridge Innovation SEIS represents an opportunity for private investors to participate in a selected portfolio of innovative seed stage innovation companies, taking advantage of the tax benefits available under the Seed Enterprise Investment Scheme. Providing seed investment to emerging technology-focused companies, the Deepbridge Innovation SEIS seeks to fund selected investee companies that possess an exciting new innovative approach to meet the existing and emerging requirements and demands of both corporate and consumer markets. The Deepbridge Investment Team has a proven track record of working with emerging companies to create value for shareholders through a hands-on investment methodology. The Deepbridge Innovation SEIS is a manager fee-free SEIS opportunity at the point of investment for subscriptions received by a financial adviser. Upfront and ongoing manager fees are paid by the Investee Companies, potentially allowing investors to enjoy up to 100% of SEIS tax benefits. Please see costs and fees section in the Information Memorandum for full details.
T. 01244 746000 E. Enquiries @deepbridgecapital.com www.deepbridgecapital.com
EIS Open
January 2013
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Evergreen
The availability of SEIS tax reliefs depends on individual circumstances, may be subject to change in future and depend on underlying companies invested in maintaining their qualifying status. Investment in unquoted companies carries high risks and investors could lose the total value of their investment. Investments in SEIS can be difficult to realise. Past performance is not a reliable indicator of future performance. This financial promotion, directed at investment professionals, has been approved by Enterprise Investment Partners LLP (“EIP”). Deepbridge Advisers Limited (FRN: 609786) is an Appointed Representative of EIP, which is authorised and regulated by the Financial Conduct Authority (FRN: 604439).
Deepbridge - Technology Growth EIS
Amount to be Raised: Uncapped
The Deepbridge Technology Growth EIS represents an opportunity for private investors to participate in a selected portfolio of innovative growth companies, taking advantage of the tax benefits available under the Enterprise Investment
Minimum Investment: £10,000
Scheme. The Deepbridge EIS focusses principally on three sectors: • Energy and resource innovation; • Medical technologies; • Business enterprise and other high growth IT-based technologies. The Deepbridge Investment Team has a proven track record of working with emerging companies to create value for shareholders through a hands-on investment methodology. The Deepbridge Technology Growth EIS is a manager fee-free EIS opportunity at the point of investment for subscriptions received by a financial adviser. Upfront and ongoing manager fees are paid by the Investee Companies, potentially allowing investors to enjoy up to 100% of EIS tax benefits. Please see costs and fees section in the Information Memorandum for full details.
T. 01244 746000 E. Enquiries @deepbridgecapital.com www.deepbridgecapital.com
The availability of EIS tax reliefs depends on individual circumstances, may be subject to change in future and depend on underlying companies invested in maintaining their qualifying status. Investment in unquoted companies carries high risks and investors could lose the total value of their investment. Investments in EIS can be difficult to realise. Past performance is not a reliable indicator of future performance. This financial promotion, directed at investment professionals, has been approved by Enterprise Investment Partners LLP (“EIP”). Deepbridge Advisers Limited (FRN: 609786) is an Appointed Representative of EIP, which is authorised and regulated by the Financial Conduct Authority (FRN: 604439).
GB Investment Magazine · October 2018
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EIS
SEIS
Open
Close
Now
N/A
Amount to be Raised: £5m Minimum Investment: £15,000
T. 01865 784466 E. info@oxfordtechnology.com www.oxfordtechnology.com
EIS Open
01.09.2017
Close
Evergreen
Amount to be Raised: £40m
Oxford Technology Combined SEIS and EIS Fund - “The Start-up Fund” OT(S)EIS invests in high risk high reward technology start-ups, in general within an hour’s drive of Oxford and has been doing this since 1983. The latest fund OT(S)EIS made its first investment in 2012. By 20 August 2018, 96 investments had been made in 31 companies. The statistics to this date are as follows: Gross amount invested by OT(S)EIS:
£4.80m
Cash back to investors via tax refunds:
£1.83m
Net cost of these investments after tax relief:
£2.87m
Fair value: £10.08 m Tax Free gain (on paper only so far):
£7.21m
OT(S)EIS remains open for investment at any time. The latest quarterly report, with a page of information on each investment is downloadable from www.oxfordtechnology.com.
Oxford Technology EIS Fund - “The Development Fund” Oxford Technology has been investing in technology start-ups since 1983. The Oxford Technology EIS Fund will aim to provide each investor a diversified portfolio of 5 - 10 EIS investments in high risk, but high potential early stage technology companies near Oxford.
Minimum Investment: £15,000
T. 020 7222 3475 E. info@oxfordtechnology.com www.oxfordtechnology.com
EIS Open
10.01.2018
SEIS Close
30.06.2018
Amount to be Raised: £2.75m Minimum Investment: £5,000
T. 020 7071 3945 E. enquiries@growthinvest.com
Dorset County Distilling Co Hutch & Alex Wright established Dorset County Distilling Co’s concept in 2015 and over years have carried out extensive research, completed distillers courses, and more, to fine-tune the concept. Located on a farm nestled in a picturesque North Dorset valley, the distillery will be using German technology, be environmentally responsible & source suppliers locally to produce premium brands of unique flavoured Dorset malt and rye whisky, gin, rum, vodka and eau de vies. The ‘English whisky’ industry is still in its infancy. There are allegedly around 14 whisky distilleries in England, of which only four are substantial non-micro producers. The Springhead Distillery would be the only substantial West Country whisky distiller and the fifth midsize facility. This creates an exciting investment opportunity exclusively available on the GrowthInvest platform.
https://growthinvest.com /investment-opportunities/
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GB Investment Magazine · October 2018
Open Offers
EIS Open
April 2017
SEIS Close
Evergreen
Amount to be Raised:
Up to £25,000,000
Minimum Investment: £10,000
T. 020 7071 3945 E. enquiries@growthinvest.com www.growthinvest.com
EIS Open
Evergreen
SEIS Close
Evergreen
Amount to be Raised: N/A Minimum Investment: £5,000
GrowthInvest Portfolio Service A discretionary investment management service which seeks to leverage the experience and expertise of the GrowthInvest investment team to select a diversified portfolio of some of the most promising companies that have passed through GrowthInvest due diligence process. GrowthInvest is an independent platform, which provides access to tax efficient investments to a growing network of UK financial advisers, wealth managers and investors. The platform aims to bring the advantages of early stage investing to a wider audience of investors and advisers, who are able to benefit from the potentially higher returns these companies can offer and tax efficiency via government approved schemes, such as SEIS and EIS. From our experience working with advisers on the Platform, the Fund has been designed to consist of three sub-funds, each with a separate investment policy. The first will target Investee Companies which qualify for SEIS Reliefs only. The second will target Investee Companies which qualify for EIS Reliefs only and the third will be a mixed investment policy which will target Investee Companies which qualify for SEIS Reliefs and / or EIS Reliefs. You will be able to choose how much of your subscription to allocate to each of these three sub-funds. The Fund is aiming to exit investments after three to seven years.
GrowthInvest - The Tax Efficient Platform for Advisers GrowthInvest is a unique, independent platform which provides access to tax efficient investments to a growing network of UK financial advisers, wealth managers and investors. Originally founded by financial advisers in 2012 as the Seed EIS Platform, we rebranded as GrowthInvest in October 2016 to better reflect the wider range of products and services available: We permit investment into a range of single company offers, as well as Managed EIS Portfolio Services and funds, giving clients a number of different investment options. • We offer a simplified asset transfer process which allows advisers to place all of their clients’ tax efficient investments onto the platform. • We provide intuitive online reporting tools, allowing advisers to monitor, analyse, and provide consolidated performance updates and quarterly reports to their clients. • All investable companies go through one of 3 defined due diligence tiers, giving added peace-of-mind to the adviser.
T. 020 7071 3945 E. enquiries@growthinvest.com www.growthinvest.com
• A single, secure online environment for all clients to review and build their tax efficient investment portfolios. We’ve placed the adviser at the heart of everything we do, making it straightforward for advisers to improve the service they offer to their clients in the tax efficient investment arena. Please visit us at growthinvest.com for more details about our current open investment opportunities.
GB Investment Magazine · October 2018
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VCT Open
09/05/2018
Close
05/04/2019
Amount to be Raised: £10m with £10m overallotment facility Minimum Investment: £3,000
Seneca Growth Capital VCT Seneca is regional award-winning specialist SME investment and advisory business. Formed in 2010, and headquartered in the North West of England, the management team have extensive experience across a range of sectors, including private equity, corporate finance, wealth management, accountancy and stockbroking. As an experienced manager in small cap and AIM company investments, Seneca has a track record of successful growth capital investments, mainly through its EIS Portfolio Service. Since 2012, through the Seneca Growth Capital EIS Fund and the Seneca EIS Portfolio Service, Seneca has raised more than £50 million of growth capital and invested in 39 SMEs through 72 funding rounds. 18 of these companies are AIM quoted. During the 5 years to 31 March 2018, the Seneca Growth Capital EIS Fund and the Seneca EIS Portfolio Service have delivered a combined average (unaudited) NAV growth rate of approximately 8.9% p.a. before the impact of Seneca’s stated fees (c.7.3% after fees. Past performance is however not a guide to future performance.
T. 020 7071 3920 E. investor-relations@lighttowerpartners.co.uk http://lighttowerpartners.co.uk/products/senecavct
DMS Open
January 2015
Close
Evergreen
Amount to be Raised: Unlimited Minimum Investment: N/A
For the VCT, Seneca will target investments with strong leadership teams, robust business models, attractive growth prospects and a capability to deliver a timely and profitable investment exit in preference to targeting specific sectors. As established growth capital providers, Seneca will continue to seek investment risk mitigation through the targeting of companies with an established proof of concept and demonstrable market demand. The first allotment of over £3m into B shares was completed in August 2018.
Property Partner Discretionary Managed Service (DMS) Property Partner is the UK’s largest property investment platform and stock exchange, allowing investors to take a view on property assets, diversify their portfolio easily, and manage their market exposure at the click of a button. Residential property is a popular investment with a strong track record, but it is not always easy to access. Our purpose is to bring accessibility, simplicity, and liquidity to this asset class. Our proposition makes it really simple for investors to diversify across multiple properties, in multiple locations, with multiple tenants, thereby reducing risk, and also removing all of the hassle associated with traditional buy-to-let. This includes tenant management, ongoing maintenance, and the significant legal and administrative burdens. Property Partner’s Discretionary Managed Service allows your clients to own their share in a number of properties of their choosing, in line with specific investment criteria. Investors will also earn 5% interest on un-invested capital. Income is paid monthly in the form of a dividend, and investors can sell their holdings whenever they like on the resale market. Property Partner is the new way for advisers to engage with clients about buy-to-let. Please get in touch for more details about how to apply.
T. 0203 457 2471 E. john.oliver@propertypartner.co www.propertypartner.co
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Property Partner™ is the trading name of London House Exchange Limited, which is authorised and regulated by the Financial Conduct Authority (No. 613499). Capital at risk. The value of your investment can go down as well as up. The Financial Services Compensation Scheme (FSCS) protects the cash held in your Property Partner account, however the investments that you make through Property Partner are not protected by the FSCS in the event that you do not receive back the amount that you have invested. Forecasts are not a reliable indicator of future performance. Gross rent, dividends and capital growth may be lower than estimated. 5 yearly exit protection or exit on platform subject to price & demand. Property Partner does not provide tax or investment advice and any general information is provided to help you make your own informed decisions. Customers are advised to obtain appropriate tax or investment advice where necessary.
GB Investment Magazine · October 2018
Open Offers
EIS
SEIS
Open
Close
Now
31.01.2019
Amount to be Raised: £3.5m Minimum Investment: £20,000
Iron Box Capital: Alive in the Morning Ltd. Alive in the Morning Ltd. will develop, produce, finance and market a slate of unique, commercial films in the horror and thriller/horror genres. Horror is one of the most popular and pro table genres in a worldwide Filmed entertainment market that will be worth a forecasted US$104.62 billion a year by 2019. It is consistently commercially successful as people love to watch movies to be scared, whether at the cinema or at home. Horror is also one of the most international genres, as fear is universal, transcending cultural and geographical boundaries. Horror Films additionally can be made on low budgets and do not need star names to attract audiences, offering the potential for a significant return-on-investment.
THE
MORNInG T. 07528616752 E. raimund@ironboxcapital.com www.ironboxcapital.com
SEIS Open
Now
Close
Evergreen – multiple close dates
Amount to be Raised: £750K Minimum Investment: £10,000
THE
MORNInG
Advance Assurance has been given.
Iron Box Film & TV seis channel in the Amersham seis fund The British Film Industry is growing, and is forecast to grow for years to come. This is fuelled by the global demand for films, through multi on-line channels, including Netflix and Amazon Prime. Iron Box’s team of experts has specialist knowledge across development, finance, production and marketing of film & television projects. As a company they are well positioned to capitalise on this growth market. The aim is to focus on the most profitable genres, where there is a clear target audience, and in using proven teams of people that have a track record of making profitable Film & TV shows. The Iron Box Film & TV SEIS Channel has been designed for UK tax payers who prefer to invest in a managed portfolio of independent filmed entertainment projects, whether for traditional films or television. There are likely to be around 4 films in each portfolio. The fund will finance projects that are commercial, with strong audience appeal, and suit the international marketplace. The companies will be SEIS eligible.
T. 020 3011 5096 E. info@symvancapital.com www.symvancapital.com
GB Investment Magazine · October 2018
57
BPR Open
Close
June 2005
Evergreen
Amount to be Raised: Unlimited
Minimum Investment: £25,000
Octopus AIM Inheritance Tax Service Since 2005, the Octopus AIM Inheritance Tax Service has offered a fast and flexible solution to inheritance tax planning, while providing the potential for significant capital growth through investment into a portfolio of 20-30 companies listed on the Alternative Investment Market (AIM). As we only select companies which meet the requirements for Business Property Relief, the shares should become exempt from inheritance tax after just two years, provided they are still held on death. Our highly experienced Smaller Companies team manages £1.5 billion on behalf of 11,500 investors across the service. Portfolio companies are chosen after detailed research, which involves spending time with a company’s management team, evaluating its competitors and assessing its financial strength. Holdings are monitored on a day-to-day basis, with the team making investment decisions. The Octopus AIM Inheritance Tax Service is also available within an ISA wrapper. The value of an investment, and any income from it, can fall as well as rise and you may not get back the full amount invested. Tax treatment depends on individual circumstances and may change in the future. Tax relief depends on portfolio companies maintaining their BPR-qualifying status.
T. 0800 316 2295 E. clientrelations@octopusinvestments.com
octopusinvestments.com
VCT Open
13.09.2018
Close
12.09.2019
Amount to be Raised: £120 million
Minimum Investment: £3,000
The shares of smaller companies could fall or rise in value more than other shares listed on the main market of the London Stock Exchange. They may also be harder to sell. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 03942880. We record telephone calls. Issued: September 2018. CAM07427-1809.
Octopus Titan VCT Octopus Titan VCT invests in tech-enabled businesses with high growth potential. It’s managed by Octopus Ventures, one of Europe’s most experienced venture capital investment teams with over 150 years combined experience. Octopus Titan VCT currently has a portfolio of around 65 early stage companies operating in a diverse range of sectors. Over the last decade we’ve backed some of the UK’s most successful entrepreneurs, including the founders of Zoopla Property Group, Secret Escapes and graze.com just to name a few. It targets a tax-free dividend of 5p per annum, plus special dividends if portfolio companies are sold at a significant profit. Investors can also claim 30% upfront income tax relief on the initial investment up to £200,000 and any capital growth is tax-free. The value of an investment, and any income from it, can fall as well as rise and you may not get back the full amount invested. Tax reliefs available depend on individual circumstances and may change in the future. Tax reliefs also depend on the VCT maintaining its VCT-qualifying status. VCT shares could fall or rise in value more than other shares listed on the main market of the London Stock Exchange. They may also be harder to sell.
T. 0800 316 2295 E. clientrelations@octopusinvestments.com
octopusinvestments.com
58
Please be aware that this advertisement is not a prospectus, and investors should only subscribe for shares based on information in the prospectus or Key Information Document (KID), which can be obtained from octopusinvestments.com/titan. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 03942880. We record telephone calls. Issued: September 2018. CAM07411-1809
GB Investment Magazine · October 2018
Open Offers
EIS Open
Close
Evergreen
Evergreen
Amount to be Raised: Evergreen Minimum Investment: £15,000
Downing Ventures EIS The Downing Ventures EIS invests in high risk, high potential return investment opportunities with a principal focus on early-stage UK technology companies, whilst also providing access to attractive EIS tax reliefs. Downing Ventures will invest across a variety of sectors. The principal focus will be on the technology sector, but we also have considerable expertise in the leisure and energy infrastructure sectors and will consider higher risk/higher return opportunities within these areas. Each of these early-stage businesses will be high risk with a significant chance of failure. However, the following factors should help to manage risk:
T. 020 7630 3319 E. sales@downing.co.uk www.downing.co.uk
IHT
BPR
Open
Close
Evergreen
Evergreen
Amount to be Raised: Evergreen Minimum Investment: £25,000
Diversification: subscriptions estimated to be spread across approximately 12 - 15 growth businesses. Due diligence: a high number of opportunities will be investigated before each investment is made (up to 30 opportunities per investment). It is anticipated that Investors will be given the opportunity to exit their investments between four and eight years from subscription.
Downing Estate Planning Service The Downing Estate Planning Service aims to preserve investors’ capital by focusing on businesses in two distinct sectors, which we believe are lower risk than some other tax-efficient sectors. It has been designed to offer full IHT relief on subscription after only two years by investing in a portfolio of businesses trading from freehold premises and/or energy businesses through investments that should qualify for Business Relief. The Service has been designed with the following key features: To take advantage of the chance to mitigate IHT liability through Business Relief To target capital growth of 4% per annum over the medium term (this is a target and is not guaranteed)
T. 020 7630 3319 E. sales@downing.co.uk www.downing.co.uk
EIS Open
Now
Close
N/A
Amount to be Raised: £10m Minimum Investment: £25,000
Create an option to receive distributions (paid quarterly, six-monthly or annually at a level set by the investor) Offer monthly access to capital with no penalties on exit (subject to liquidity)
EcoMachines Ventures - EMV EIS Fund EcoMachines Ventures (EMV) is a London-based investor in B2B industrial high-tech companies investing in, building, and supporting the growth of high-potential technology SMEs with core technological innovation. EMV has experience working and co-investing with some of the world’s largest industrial players in its focus area including ABB, Philips Lighting, Evonik Industries and Flex. The EMV EIS Fund I is a discretionary portfolio focusing on EIS qualifying investments in high growth technology areas including: • Robotics and artificial intelligence (“AI”) • Power electronics and controls • Internet of things (“IoT”) • Materials science and chemistry The Fund will focus on the use of these technologies within the following broad sectors: • Energy and energy efficiency • Industrial high-tech • Resource efficiency • Smart cities and smart buildings • Smart transport
T. 203 761 6138 E. info@ecomachinesventures.com www.ecomachinesventures.com/emv-eis-fund
EMV is acting as exclusive advisor to the fund, bringing its established expertise, analytical framework and network of corporate relationships to provide quality investments and attractive EIS tax relief to investors. The fund manager is Sapphire Capital Partners, an award-winning specialist fund manager focused on EIS and SEIS schemes. The Fund is also supported by Mainspring, a leading UK fund custodian.
GB Investment Magazine · October 2018
59
EIS Open
Close
2012
Evergreen
Amount to be Raised: Unlimited Minimum Investment: £20,000
Par Syndicate EIS Fund The Par Syndicate EIS Fund (“the Fund”) is a growth company focused EIS fund, targeting opportunities across a range of technology sub-sectors. Fund manager Par Equity has been investing in this area since 2009 and has developed a distinctive and successful investment model. As well as the Fund, Par Equity serves a large and active business angel group, the Par Syndicate. This expert investor group brings through its members sector knowledge as well as business expertise. The Fund therefore invests alongside, and on the same terms as, experienced industry insiders, so benefiting from a high quality flow of investment opportunities. Typically, companies invested in will be developing or exploiting an innovative technology and aiming at a global market.
T. 0131 523 1057 E. pauline.cassie@parequity.com www.parequity.com
EIS Open
Evergreen
Close
Evergreen
Amount to be Raised: £15m+ Minimum Investment: £25,000
T. 020 3327 4861 E. EIS@hambroperks.com www.hambroperks.com
60
Returns are expected to take the form of outright sales of portfolio companies, with an average holding period of around seven years. The Fund’s benchmark return is 15% per annum after all fees and charges but before tax. Par Equity secured its first exit in 2012 and the Fund, having started investing in 2012, had its first exit in 2016.
Hambro Perks Co-Investment Fund Hambro Perks helps outstanding Founders build world-changing businesses. The provision of permanent, patient capital from our own balance sheet means we are completely aligned with the long term goals and interests of the entrepreneurs and investee companies that we support. We aim to take early risk in businesses, investing where we can add significant value through applying and sharing the expertise our team has built over many decades’ combined experience of founding, building, internationalising and exiting companies. We believe we are the destination of choice for the very best entrepreneurs, and they actively choose us to support them as they build fast growth tech-enabled businesses. Our main areas of focus are education technology, digital health, insurance technology, digital media and fintech. The Hambro Perks Co-Investment Fund enables individuals to co-invest alongside and on a fully aligned basis with Hambro Perks, thereby benefiting from this extraordinary access and proprietary dealflow while utilising EIS reliefs. Please get in touch for more information.
GB Investment Magazine · October 2018
Open Offers
EIS Open
Close
Now
Evergreen (1st close 28 Sep 18)
Amount to be Raised: £10m Minimum Investment: £25,000
Nexus Investments’ Scale-Up Fund The Nexus Investments’ Scale-Up Fund provides each investor a diversified portfolio of 8 – 10+ EIS investments in high risk, but high potential early-stage entrepreneur-led businesses. These businesses will be in one or more of the data, digital, education and health sectors, the areas of greatest potential for UK companies to make an impact in the coming 10-20 years. As well as the Fund, Nexus Investments serves a large and active business angel co-investor group. The Fund Manager, Nexus Investments, has been arranging, advising and co-investing in these areas since 2014, having developed a promising track record and a distinctive investment model. Returns are expected to take the form of outright sales of portfolio companies, with an average holding period of 5 - 8 years.
T. 0207 104 5595 E. info@nexusgroup.co.uk www.scaleupfund.co.uk
IHT
BPR
Open
Close
Evergreen
Evergreen
Minimum Investment: £30,000
Fundamental
T. 01923 713 890 E. enquiries@fundamentalasset.com www.fundamentalasset.com
SEIS Open
May 2018
Close November 2018
Amount to be Raised: Open Minimum Investment: £10,000
Fundamental AIM IHT Portfolio Fundamental Asset Management is an independent, owner managed, investment management firm with an unrivalled knowledge of the AIM market. It has successfully provided AIM portfolio management with inheritance tax planning to private investors, trusts and institutions since 2004 delivering outstanding returns. Our investment ethos for AIM IHT Portfolios is conservative and value based. At its foundation is our in-depth, in-house research, which includes visiting and meeting senior management of hundreds of companies each year. As well as being available on its own broker platform the Fundamental AIM IHT Portfolio service can also be accessed through the AXA Elevate, Nucleus, Standard Life and Transact platforms.
The British Robotics Seed Fund Across the globe, the robotics industry is reaching a tipping point. For the first time, it is becoming cheaper to own, operate and maintain a robotics system, than it is to use manual labour. Robots are expected to perform 25% of industrial work by 2025. The British Robotics Seed Fund 2 (Sidecar), in conjunction with Sapphire Capital Partners LLP, is one of the first SEIS funds to specialise in UK robotics and AI start-ups. It aims to take advantage of the robotic revolution. Highlights: • Predominantly SEIS offer targeting 3x return, not including tax relief (returns not guaranteed); • A portfolio of around ten early stage robotics and artifical intelligence (AI) companies; • Fast growing sector, capitalising on Britain’s strength in robotics and AI;
E. dominic@britbots.com www.britbots.com
• Fund 2 (Sidecar) will invest predominantly in the 2018/19 tax year (with benefits eligible to be carried-back to 2017/18); • Exit targeted in three to eight years (not guaranteed).
GB Investment Magazine · October 2018
61
BPR Open
Close
January 2018
Open ended
Amount to be Raised: Open ended
Minimum Investment: £40,000 (£20,000 for additional investment)
Guinness Best of AIM Service The Guinness Best of AIM Service is a discretionary managed service investing in AIM-quoted companies that qualify for Business Relief with the potential for capital growth. The rigorous quantitative portfolio selection approach has been adapted from the process used in Guinness Asset Management’s successful range of global equity funds. The detailed screening process is underpinned by the quality, value and conviction of each eligible AIM-quoted stock. The service consists of a high-conviction concentrated portfolio of 20 companies across a range of sectors that have persistently generated a real return on invested capital. We target a low portfolio turnover to minimise dealing costs whilst maintaining a competitive fee structure.
T. 020 7222 3475 E. shane.gallwey@guinnessfunds.com www.guinnessfunds.com/iht
BPR Open
Close
03.09.2018
Open ended
Amount to be Raised: Open ended
Minimum Investment: £25,000
Clients are able to access their capital, without exit penalties, enabling them to retain control of their assets.
Guinness Sustainable Infrastructure Service Subscriptions made to the The Guinness Sustainable Infrastructure Service will be invested into shares of one or more companies that qualify for Business Relief with no initial fee for advised clients. Investee companies will own and operate Sustainable Energy projects, such as roof mounted solar. These projects have strong visibility of revenues that are usually index-linked which helps to achieve capital preservation. Target Return to investors is in excess of 5% p.a. net of fees which is aided by fixed capital costs, low operating costs and predictable revenue streams with low annual variability.
T. 020 7222 3475 E. shane.gallwey@guinnessfunds.com www.guinnessfunds.com/iht
EIS Open
Close Evergreen with quarterly tranche closures
19.09.2016
Amount
to
be
Raised:
£50m
Minimum Investment: £20,000
Inflation-linked long term (20 year plus) Power Purchase Agreements are able to benefit from government subsidies where available. Clients are able to benefit from access to their capital by redemption of shares on a regular or ad hoc basis.
Guinness EIS The Guinness EIS seeks to invest in at least five investee companies to create a portfolio of investments across a range of sectors. Characteristics favoured by the investment management team are asfollows: • Businesses with experienced management teams - Many entrepreneurs are serial entrepreneurs. They have successfully builtand sold companies and we look at their sector specific successes when they are looking for investment in new/ existing ventures • Businesses with good visibility on future growth - Maturing companies and businesses with clearly defined growth paths • Businesses with expanding working capital requirements - Successful businesses often require additional funds to expand their working capital to fund stock and debtor growth.
T. 020 7222 3475 E. shane.gallwey@guinnessfunds.com www.guinnessfunds.com/eis
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The Guinness EIS is an evergreen service with tranche closures at the end of each quarter. All subscriptions received in the current tranche will be invested in the 2018/19 tax year.
GB Investment Magazine · October 2018
Open Offers
EIS Open
Close
03.09.2018 Amount
to
06.04.2019 be
Raised:
£10m
Minimum Investment: £20,000
T. 020 7222 3475 E. shane.gallwey@guinnessfunds.com www.guinnessfunds.com/eis
EIS Open
Now
SEIS Close
Multiple
Amount to be Raised: Evergreen
Minimum Investment: £10,000
T. +44 20 3858 0847 E. info@worthcapital.uk worthcapital.uk
Guinness AIM EIS 2019 The Guinness AIM EIS seeks to invest in at least 10 investee companies to create a portfolio of investments across a range of sectors. It targets AIM quoted companies withe the flexibility to invest up to 20% in the NEX growth market and pre-IPO. The AIM EIS closes annually on 6th April for investment in the subsequent 12 months in newly issued AIM stocks that have EIS Advance Assurance in place and targets a return of £1.30 per £1.00 invested net of all fees. Subscriptions received by 6th April 2019 will be invested in the 2019/20 tax year which will allow for carry back of income tax relief to 2018/19. The Guinness AIM EIS is an HMRC approved fund so that investors receive one EIS 5 certificate for all holdings once the portfolio is invested. The AIM market is relatively liquid and provides a natural exit route with the intention to exit shares held soon after the EIS 3 year holding period. For this service, Guinness will defer all fees until exit, which maximises the amount on which investors can claim EIS tax reliefs.
Start-Up Series Fund The Start-Up Series Fund is an evergreen EIS & SEIS service. Managed as an Alternative Investment Fund by Amersham Investment Management Limited, authorised and regulated by the FCA. The service is designed for eligible subscribers to be invested in selected winners of the Start-Up Series, a monthly competition organised by Worth Capital Limited and promoted by startsups.co.uk. The Fund invests in qualifying B2C or B2B companies with innovative products or services that can create new consumer behaviours in growth markets, with teams that demonstrate compelling marketing & communication skills and with a clear credible route to exit. -
EIS & SEIS investments - choose EIS, SEIS or both
-
Businesses selected by real world, commercial entrepreneurs with deep brand, marketing, retail & innovation expertise – worth capital
-
A unique approach to UK EIS & SEIS fund investing – a monthly competition, around one hundred businesses considered each month
-
Ongoing oversight from experienced investor directors - skilled in helping accelerate growth & reducing risk
-
Investments in ‘mini-portfolios’ of typically 3 or 4 businesses
-
Investments qualifying for attractive EIS & SEIS tax reliefs
Any investment in the Start-Up Series Fund places your capital at risk of total loss and will not be readily realisable. Tax treatment depends on individual circumstances and is subject to change. We recommend you take professional advice before investing.
GB Investment Magazine · October 2018
63
BR Open
Close
Evergreen
Evergreen
Amount to be Raised: Unlimited
TIME:CTC (Corporate Trading Companies) TIME:CTC is a bespoke Inheritance Tax (IHT) solution for corporate investors, which boasts an impressive 22 year track record of delivering IHT relief for investors. TIME:CTC is aimed at business owners who have built up surplus cash in their business and could potentially lose Business Relief (BR). The focus of TIME:CTC is on capital preservation by investing in asset backed businesses which qualify for BR. These businesses include secured lending, renewable energy, biomass and self-storage. Our strategy allows business owners to maintain control of their assets, avoiding the need for trusts or gifting to obtain relief. Targeting a return of 3.5% and potentially immediate reinstatement of BR qualifying assets. To date more than 1,000 of our clients have exited and achieved BR.
T. 020 7391 4747 E. questions@time-investments.com www.time-investments.com
BR Open
Close
Evergreen
Evergreen
Amount to be Raised: Unlimited
TIME:AIM TIME:AIM uses our unique ‘smart passive’ approach in selecting companies listed on AIM for inclusion within the investment portfolios we create for investors. Designed to offer lower volatility returns than the AIM market, TIME:AIM will only target AIM listed companies that qualify for BR. SMART because we use an innovative, defensive market screening process PASSIVE because we remove stock picker bias and ignore market sentiment A welcome secondary benefit of this approach is that we are able to offer this service with a lower annual management fee than traditional AIM BR fund managers. We believe our service creates a robust portfolio that will allow investors the opportunity for significant growth potential and mitigation of their IHT liability after only two years. • Available within an ISA and non-ISA wrapper
T. 020 7391 4747 E. questions@time-investments.com www.time-investments.com
BR Open
Now
Close
Evergreen
Amount to be Raised: Unlimited
• IHT relief in just two years • Focus on reducing volatility • Removal of stock picker bias • Lower cost than traditional AIM services
TIME:Advance TIME:Advance is a discretionary management service that allows investors to access Business Relief (BR) to mitigate their Inheritance Tax (IHT) liabilities. The service offers 100% IHT relief in just two years, alongside a targeted return of 3.5% per annum. Importantly clients retain access and control, so have the option to withdraw a lump sum or set up regular withdrawals in the form of an income. The service focuses on capital preservation by investing in asset backed businesses which qualify for BR. These businesses include secured lending, renewable energy, biomass and self-storage. The product is managed by an expert team, with a proven 22 year track record of success in achieving BR for investors.
T. 020 7391 4747 E. questions@time-investments.com www.time-investments.com
64
GB Investment Magazine · October 2018
EIS Open
Amount
to
Fund Twenty8
Close
11.09.2018
25.09.2018 be
Raised:
NA
Minimum Investment: £10,000
Invest in the UK’s most promising startups. By following the investment decisions of some of the savviest private investors, Fund Twenty8® automatically builds you a diversified portfolio of no fewer than 28 EIS qualifying startups. The fund’s strategy is based on extensive research conducted by NESTA and Intelligent Partnership which asked the question: how many startup investments should I have? The magic number appears to be: at least 28. With this many startups in your portfolio, the study suggests a 95% chance of at least one giving you a 10X return or more. With this in mind, the fund is targeting a return of over 20% IRR including up to 30% EIS tax relief.
T. 01223 478 558 E. fundtwenty8@syndicateroom.com https://www.syndicateroom.com/ funds/fund-twenty8
SITR Open
Feb 2016
Close
Evergreen
(with roughly quarterly closes)
Amount to be Raised: £5m Minimum Investment: £20,000
Now in its second year, Fund Twenty8® has already attracted 377 investors, who in total have committed £7.9m.
Resonance Bristol and West Midlands SITR Funds The Resonance Bristol SITR Fund (a sub-fund of the Resonance SITR Fund), is one of the first investment funds in the country to benefit from Social Investment Tax Relief (SITR). The Fund enables investors to build a portfolio of investments with the potential for attractive returns and tax relief benefits, whilst also helping to dismantle poverty in and around the City of Bristol through investing in the growth of high impact, mission-driven social enterprises. Based on the success of the Resonance Bristol SITR Fund, Resonance has now launched its second SITR Fund in the West Midlands (the Resonance West Midlands SITR Fund), which is now live and open for investment. SITR offers similar tax reliefs to those available through the Enterprise Investment Scheme (EIS), including a 30% income tax relief. The key innovation is that SITR is available on debt, as well as equity. This means that debt focused SITR Funds can offer the flexible, affordable loan capital that social enterprises require to grow their businesses and social impact, whilst also offering investors a more predictable income profile and exit route compared to equity based Funds.
T. 07718 425 306 E. grace.england@resonance.ltd.uk www.resonance.ltd.uk
Resonance has over 16 years of experience in arranging investment into social enterprises, and now has over £160m under management through eight social impact investment Funds. These funds deliver financial return as well as targeted social impact in a range of areas – from tackling homelessness to health inequalities.
EIS Open
May 2018
SEIS Open
Evergreen: First tranche for 2018/19 to close on the 29th of June (subject to minimum fund raise)
Amount to be Raised: £5m Minimum Investment: £10,000
Jenson SEIS & EIS Fund Applying a very structured sector agnostic investment approach, the Fund targets exciting, innovative and disruptive technologies which qualify for SEIS investments, Jenson will typically invest the full allowable amount of £150,000 per company. These investee companies are then nurtured via the Investee support programme, which provides financial and operational assistance to investee companies - enhancing returns, a key differentiator between Jenson and other SEIS and EIS providers. The EIS element of the fund is used to provide follow-on funding to fully exploit commercialisation of a proven business model. Jenson Funding Partners has been investing since 2012 and has made just under 100 investments. To date the SEIS has invested circa £12 million and the EIS, combined with the syndicated investors, has invested over £5 million and raised over £5million of debt facilities. They actively advise entrepreneurs to re-evaluate business models reduce projected costs and introduce potential executives, partners, customers and suppliers as part of the value add service they provide. Jenson aims to offer these businesses far more than just funding.
T. 020 7788 7539 E. seis@jensonsolutions.com www.jensonfundingpartners.com
EIS Open
January 2015
EIS Close
Evergreen
Amount to be Raised: Unlimited
The combined SEIS and EIS structure enables an individual to choose whether to invest in earlier start-up companies within SEIS or later stage companies under EIS, with investors having the choice as to whether they want to invest solely via SEIS or EIS or to split their funds across SEIS and EIS investments, thus enabling the investor to maximise the tax advantages.
CHF Enterprises CHF Enterprises Limited presents an exciting opportunity for UK tax payers to invest in SEIS and EIS qualifying Family Entertainment via CHF’s Investee Companies, whilst benefiting from risk mitigation through considerable investor Tax Relief and government backed Tax Credits. A 40 Year Global Success Story: The CHF creative team can trace its history to UK’s Cosgrove Hall producing household names including Danger Mouse, Wind in the Willows, Noddy, Postman Pat, Roary the Racing Car, Count Ducula… winning 9 BAFTAs and 2 Emmys. The CHF Media Fund was set up in 2015 to offer the opportunity to invest in the new slate of CHF content. Why the CHF Media Fund? • Proven Track Record and award winning team with 250+ years collective industry experience with time also spent at Disney, Henson, Dreamworks and more • Low charges and market leading RIY • 3-5 year Exit Strategy from each show’s launch • Target Return 3 times net investment with unlimited upside and no cap
T. +44 (0)117 214 1149 E. ninacarr@chfmedia.com www.chfenterprises.co.uk
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• Fortnightly Deployments with EIS 3’s issued at earliest opportunity • Unique Multiple Revenue Streams from worldwide broadcast and online sales plus licensing and merchandising • Government Animation Tax Credit benefits should apply to all UK produced CHF shows
GB Investment Magazine · October 2018
Open Offers
Cast a bigger shadow. We plan. We create. We write. We design. We develop. But best of all, we get you noticed. Give us a call if you need some Wow in your business.
thewowfactory.co.uk
01622 427955
THE
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GB Investment Magazine ¡ October 2018
THE GROWTHINVEST PORTFOLIO SERVICE.
OPEN FOR BUSINESS.
The GrowthInvest Portfolio Service allows Advisers to introduce their clients to the best of our SEIS and EIS qualifying investment opportunities in a single discretionary managed fund. If you or your clients are interested in a diversified portfolio of tax-efficient investments,
then contact us to find out more. We are helping UK small businesses to realise their full potential, whilst giving Advisers the tools to introduce their clients to this exciting investment category. For more information contact us now at growthinvest.com
MAKE IT YOUR BUSINESS
