Finding the next Facebook

Each week, a professional investor tells us where she’d put her money. This week: Ruth Richards of Wealth Club.

Venture capital trusts (VCTs) provide valuable growth capital to small businesses in Britain. When you invest in new shares directly via a fundraising (as opposed to shares already listed on a stock exchange), you receive up to 30% income tax relief. So for every £10,000 you invest you could get up to £3,000 back from the taxman. Dividends (often very generous) are also tax free, as is any capital growth.

This year’s VCT season began early: £340m has already been raised this tax year, compared with £50m in the same period last year. A key reason for this is a government consultation on how the UK funds its high-growth businesses. Ironically, the talk is that VCT tax relief could become less generous. As a result, VCT investors are acting now before any possible changes are brought in by Chancellor Philip Hammond in next week’s Budget. Below I’ve looked at three VCTs to consider – they have quite different investment styles so could dovetail well together.

Mobeus has been a dividend-producing machine. If you had invested £10,000 in 2010/11 in a linked offer across its four VCTs, you would have received £7,983 in dividends by now. That’s quite remarkable when you consider the effective cost of the investment would have been just £7,000 after VCT income-tax relief. The risks here are contained by VCT standards – the fund has invested significantly in management buy-outs (MBOs) with great success. Even though new VCT rules no longer permit this type of deal, if you invest today you still get exposure to the existing portfolio of large, profitable, cash-generative businesses, as well as new investments.

Maven VCTs give investors access to a decent portfolio of existing investments, plus newer ones in younger, more dynamic companies. Since the rules became more restrictive in 2015, Maven (which was spun out of Aberdeen Asset Management) has been one of the most active managers. Recent investments include The GP Service (an online GP service, as the name suggests); Rockar, an innovative car dealership; and Chic Lifestyle, a cloud-based inventory-management platform for boutique hotels. With ten regional offices, Maven has access to deals many of the more London-centric VCTs might miss.

Lastly, if any VCT is going to find the next Facebook, we believe it will be Octopus Titan. It was an early investor in property portal Zoopla, the first VCT-backed company valued at more than £1bn. Other investments include Graze.com, Secret Escapes and Eve Sleep. It has also had successful sales to the likes of Google, Amazon, Twitter and Microsoft. Last year Magic Pony was sold to Twitter for a reported $150m and SwiftKey to Microsoft for a reported $250m. Octopus also allows you to invest money from your individual savings account (Isa) into a VCT. This means that if you like the VCT you can invest using existing Isa money, ie, without spending any new cash, but still getting income-tax relief of up to 30%.


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