Type: Portfolio of Albion venture capital trusts
Aim: Income and growth by investing in small unquoted companies through a portfolio of VCTs comprising 15% each in Albion Venture Capital Trust, Albion Development VCT, Albion Technology & General VCT, Albion income and growth VCT, Crown Place VCT, Albion Enterprise VCT and 10% in Albion Prime VCT
Minimum investment: Lump sum £10,000
Closing date: April 5, 2012
Charges: Initial 5.5%, annual 2% plus 8% performance fee for investment in the Albion venture capital trust, annual 2.5% plus 20% performance fee each for investment in the Albion Technology & General and Albion Income and Growth VCTs, annual 2.25% plus 20% performance fee for investment in the Albion Development VCT, annual 1.8% plus 10% performance fee for investment in the Albion Prime VCT, annual 1.75% plus 20% performance fee for investment in the Crown Place VCT, annual 2.5% plus 20% performance fee for investment in the Albion Enterprise VCT
Special offer: 1% of amount invested in extra shares for investors who apply for the first £2.5m in new shares
Offer period: Until first £2.5m target is met
Commission: Initial 3% or initial 2% plus 0.4% renewal for five years
Tel: 020 3006 7530
RAM Capital Partners and Albion Ventures are raising up to £15m through a linked venture capital trust top-up offer that divides investors’ capital between all seven Albion VCTs.
Through this linked offer, investors will gain immediate access to a portfolio of around 60 small unquoted UK firms. Many will be asset backed and these lower-risk investments will be combined with a smaller number of higher-risk investments with higher growth potential. The portfolio is weighted, with 15 per cent invested in six of the VCTs and 10 per cent in one of the VCTs.
LIFT-Financial chartered financial planner Ross Glanfield says: “Albion has launched its 2011/12 VCT, which is seeking to raise £15m to provide liquidity across seven existing Albion VCTs and provide capital to take advantage of new investment opportunities.”
Glanfield highlights the tax advantages of investing in a VCT. He points out that VCTs provide relief from both income tax and capital gains tax in the form of 30 per cent tax relief on the initial gross investment and exemption from tax on the payment of dividends or disposal. “Relief from income tax is given irrespective of the rate of tax paid but it is limited to the amount of tax paid by the individual. However the relief can be reclaimed by HMRC if the investment is encashed or sold within the first five years,” he says.
Glanfield says the Albion team is one of the biggest and most experienced in the VCT market, with a history going back to 1996. “Albion manages over £228m in VCTs, of which £185m is invested in the VCTs seeking the top-up. The Albion team has always remained faithful to the original ethos behind VCTs, which was to invest in and assist with the development of small higher-risk trading companies. It has resisted the temptation to enter into the limited-life or specialist markets, and has sought to keep developing a deal-flow of investment opportunities across a diverse range of sectors from hotels, pubs and leisure centres to healthcare, education and environmental projects,” says Glanfield.
He notes that the underlying portfolio of investments for this linked top-up offer, which spans all seven VCTs, comprises 55 per cent asset-backed ventures with the investment secured as first charge on commercial property. Around 20 per cent is in cash awaiting investment and providing liquidity, while 25 per cent is held in more speculative ventures. “In total, there are investments in 60 businesses across the portfolio, with the biggest valued at £11m. Also there is no gearing within any of the VCTs in the portfolio,” he says.
Glanfield adds that investments into this linked offer will qualify immediately for a target dividend of 5 per cent a year. “This is achieved by diluting the dividend stream of the existing investments in the portfolio and the size of the offer is limited to minimise the dilution. The advantage to the existing shareholders is the introduction of new capital to fund other investment opportunities with the aim of growing the dividend and return. Interestingly, for investors who do not require an immediate income, the dividends can be reinvested. These investors will receive a further 30 per cent tax relief as if the reinvested dividends are new money, provided that the investor has sufficient tax liability to offset this. If the income is required, it can be turned on again at a later date and Albion expects dividends to be paid every month,” says Glanfield.
Turning to the potential drawbacks of the linked offer, Glanfield says: “The performance of VCTs in general over the last five years has been unspectacular and Albion admits it has not been satisfied with its returns.
“In addition, the lack of liquidity of VCTs and the absence of a significant second-hand market have driven the move towards the limited-life market and away from the generalist, open-ended providers. However it is likely that the Chancellor’s Autumn Statement on November 29 will contain at least a message to VCT companies that they need to refocus on their original mandate or risk losing their valuable tax benefits. That could signal a change in investment focus and/or direction. If that is the case, Albion is likely to see a strong inflow of funds for the foreseeable future due to its experience in the generalist sector,” says Glanfield.
Assessing the charges, Glanfield observes that this linked VCT offer has an initial charge of 5.5 per cent, which he regards as fairly standard. He points out that from this 5.5 per cent initial charge, adviser commission of 3 per cent is payable. “There is also the option for the adviser to receive 2 per cent initial commission and 0.4 per cent renewal commission for five years. The running costs are capped at 3.5 per cent and this level of charge is also not unusual for a VCT,” says Glanfield.
Summing up, Glanfield says this linked VCT offer will suit investors who want an immediate tax-free income. “It will also appeal to investors who plan to hold this product as part of a long-term portfolio. As an alternative, Baronsmead is launching a top-up of its generalist VCTs in December, but the details are not yet available,” he says.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average