An Ingenious idea

4 March 2010 0:36 am

Type: Venture capital trusts

Aim: Growth by investing initially in cash funds, then in companies that create or produce live events or entertainment content

Minimum investment: Lump sum £3,000

Charges: Initial 5.5%, annual 1.75%, performance fee 20%

Closing date: April 3, 2010

Commission: Initial 3% or initial 2.5% plus renewal 0.25% for five years

Tel: 020 7319 4000

Ingenious Investments is offering D shares in its dual venture capital trust offer for the Ingenious entertainment VCTs 1 and 2. The directors aim to use the five-year life of the VCT to develop each investment with the aim of building a brand in the live events and entertainment markets that can be sold to a third party.

Chelsea Financial Services head of investment products Matthew Woodbridge describes Ingenious as one of the UK’s leading media investment specialists. “It is the biggest operator of VCTs in the entertainment sector, having raised over £85m of funds.”

Woodbridge points out that with this offer for D shares in Ingenious entertainment VCT 1 & 2, Ingenious aims to invest in companies within the entertainment sector. It will use established techniques to mitigate the risk to capital, such as structuring the deals as a combination of equity and loan stock.

“The investment strategy of building up value within the brands held within the portfolio is very attractive and has been demonstrated to work within the Ingenious live VCT,” says Woodbridge.

He observes that the dual Ingenious Entertainment VCT offer is a limited life VCT that has a clear plan to wind-up after the minimum five year holding period.

This means that investment returns are more limited in scope than with a traditional generalist VCTs. “Ingenious is targeting a return of 128p, on a net cost of 70p. The minimum targeted return is 77p, on a net cost of 70p,” he says.

Woodbridge regards the literature is clear and thinks the level of adviser remuneration offered is average.

Turning to the potential drawbacks of the VCT Woodbridge says: “There is no guarantee that the timing of the exit will be the best time to realise value in the companies held in the portfolio.” He adds that the deals are focused on the entertainment sector, which not appeal to some clients.

Competition is likely to come from the Edge Performance VCT F share offer, in Woodbridge’s view, as it also looks to mitigate risk to capital while investing in the entertainment sector. “Another limited life VCT worth consideration is the Downing planned exit VCT 2 and 3, which follows an asset backed strategy,” he says.

Summing up, Woodbridge says the Ingenious offer is worth considering for investors looking for a limited Life VCT with exposure to a fast growing sector that proved resilient during the downturn.

BROKER RATINGS

Suitability to market: Good

Investment strategy: Good

Charges: Average

Adviser remuneration: Average

Overall 7/10

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