Catalyst is a specialist in EIS funds, venture capital trusts and investment in unquoted companies and structured products. It previously worked with Arc Fund Management as the corporate adviser to its EIS growth funds and VCT to the market, but following a decision by the companies to separate, it has formed an arrangement with Stargate Capital.
Stargate Capital specializes in structured products and tax-efficient investments that are a different to the usual array of available products. It currently runs Trapezia, an EIS fund investing in women-driven businesses, and its long-term track record was appealing to Catalyst.
The Catalyst Stargate EIS will be a generalist approved EIS fund, investing in at least four young, growing companies. The main difference between approved and unapproved funds is that approved status from HM Revenue & Customs allows income tax relief to be claimed from the date of investment in the fund. For unapproved funds, the claim can only be made when the actual underlying investment is made.
Conditions are also strict for approved funds – at least 90 per cent of the money raised must be invested in at least four companies within six months.
When selecting suitable investment opportunities, Catalyst and Stargate will look across sectors for strong management teams, as they view the investment in terms of the people behind the businesses.
An important aspect of Catalyst’s role is taking a seat on the board of the companies contained in the fund. The purpose of this is enabling growing companies to benefit from additional expertise and to reassure investor In the fund that someone is keeping a close eye on the underlying investments.
Catalyst and Stargate will both contribute investment ideas to the portfolio, so the EIS fund will benefit from deals, which come the way of both companies.
Traditionally, EIS investments have focused on one company so an EIS fund brings diversity to the party for investors who are looking for the associated tax breaks. However, investing in growing companies can be risky and may have most appeal for sophisticated investors with capital gains issues.