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: First closing date January 7, 2011, final closing date April 5, 2011
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% plus 20% performance fee for investment in the Albion Enterprise VCT
Special offer: 1% of amount invested in extra shares
Offer period: Until January 7, 2011
Commission: Initial 3% or initial 2% plus 0.4% renewal for five years
This linked venture capital trust offer from Albion Ventures provides exposure to a portfolio of all the firm’s seven VCTs.
Chelsea Financial Services head of investment products Matthew Woodbridge says: “The product literature is clear and easy to understand. It is offering investors the opportunity to invest in the seven generalist VCTs managed by Albion Ventures, which was previously known as Close Ventures until a management buy-out in January 2009.
“Under the prospectus rules, Albion is not required to print a full prospectus for each of the seven VCTs so the offer document is slim compared to most VCTs. The investor guide is informative and helpful,” he says.
Woodbridge notes that Albion is one of the founding fathers of the VCT industry and has managed VCTs since 1996, so investors will gain access to an experienced VCT management team and one with a strong track record. “The investment strategy employed by Albion is to invest around half of the monies in asset-backed businesses such as health clubs, pubs, hotels and cinemas where the VCT has control of the asset should the business fall into difficulty. A quarter is invested in high growth companies where the risk is greater but so are the potential rewards, with the remainder in cash. Albion does not use bank gearing in its deals.”
Woodbridge thinks that one of the most attractive features is that all seven VCTs aim to pay half yearly dividends. “This means a dividend will be payable monthly, which is unique among VCTs and of appeal to retired high-net worth investors looking for an alternative source of income.
“Albion operates dividend reinvestment schemes on all their VCTs for those who do not want to receive the income at present. The target dividends across the seven VCTs do vary but the target tax-free yield will be around 5 per cent a year, which is equivalent to 7 per cent a year on the net cost of investment after the 30 per cent income tax relief.
“Commission is 3 per cent initial or 2 per cent initial plus 0.4 per cent renewal for five years. The second option is attractive and an increase from previous offers.”
Woodbridge thinks this offer is potentially attractive to higher-rate taxpayers, especially those with an income of £150,000 or more who will be subject to the new 50 per cent rate of income tax and who will be constrained in how much they can invest in their pension.
Considering the less appealing features, Woodbridge says: “Some of the valuations of the asset-backed businesses in the portfolios have been written down in the light of the current economic climate, but this could be viewed as an opportune time to invest.” He adds that unlike some VCT linked offers, investors cannot cherry pick which VCT to invest in.
Woodbridge expects competition to come from other established generalist VCTs offering top-ups to ordinary share portfolios and access to a dividend stream.
“Advisers could consider offers such as Northern venture trust, Matrix linked offer, ProVen growth & income and Maven linked offer,” he says.
Summing up Woodbridge says: “This offer should be viewed as a collection of established generalist VCTs and not confused with planned exit VCTs. The portfolios comprise a total of 55 unquoted businesses, which offers diversification from traditional stockmarket investments. “
He adds that it is better to think of VCTs as a supplement to an investor’s retirement income and held for the very long term. “Advisers can make their clients aware of the risk factors specific to investing in VCTs,” he says.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good