First State Investments is aiming to raise up to £20m for its Aim VCT, a venture capital trust which invests in the Alternative Investment Market.The management team for the VCT is led by First State head of UK equities Paul Jourdan, who runs the First State British smaller companies fund. This fund, which contains Aim-listed holdings, was established in 1998 and has invested more than £15m in Aim investments over the past three years. Jourdan and senior analyst Mikhail Zverev will look for Aim companies that are well financed, well managed and where earnings’ growth looks likely to grow faster than the economy. One issue for Jourdan is that VCT rules state that at least 70 per cent of the money raised must be invested in qualifying holdings during the first three years. Jourdan believes this restricts the ability to diversify and manage risk, making it difficult to change the portfolio in line with market conditions, especially as Aim companies can lack liquidity. This VCT will aim to meet these challenges by using the non-qualifying holdings as a means of balancing the portfolio. Nonqualifying holdings may include direct equities, government bonds, investment-grade corporate bonds and money market funds. Derivatives will also be used to offset the risk from equities. An Aim VCT such as this could be well placed to take advantage of current demands for VCTs. Research from the Noble Group found that when asked to select which type of VCT will be most popular this year, 50 per cent of IFAs surveyed chose Aim VCTs, 40 per cent chose generalist and 10 per cent said specialist. However, the study found that over half the IFAs surveyed were increasingly confused by the number of VCTs on offer, so another Aim VCT may overcrowd the market.