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Classic trust from Downing

Downing Corporate Finance



Classic VCT 3

Aim: Growth and income by investing in technology companies and mature unquoted companies including those in AIM and OFEX.

Minimum investment: £5,000.

Opening-closing date: November 2, 2000-January 31, 2001.

Charges: Initial 5 per cent, annual 2 per cent.

Commission: Initial 2.5 per cent, renewal 0.25 per cent.

Tel: 020 7411 4700.

Broker Panel:-

Michael Both – Partner, Michael Philips

Jeremy Marsh – Investment Manager, Lupton Fawcett Solicitors

Andrew Hosking – Managing Director, Eggar Forrester

John Wright – Proprietor, Investment Management Services

Michael Gilbey – Managing Director, Atlantean Financial Management Limited

Broker Ratings (ave. marks out of 10):-

Investment philosophy: 6.6

Past performance: 6.8

Company&#39s reputation: 6.6

Charges: 5.8

Commission: 6.6

Product literature: 7.6

Downing&#39s Classic VCT 3 invests in technology companies and mature unquoted companies, including those in AIM and OFEX.

Looking at how well the trust fits into the market, Marsh feels that it will appeal to the higher rate taxpayer, while Hosking says: “It is venture capital trust (VCT) season with an opportunity to subscribe now to reduce capital gains tax (CGT) payments due at the end of this month, or subscribe for the beginning of the next tax year. VCT&#39s are pure tax planning vehicles.”

Gilbey says that Downing&#39s product is much in line with the bulk of offerings coming onto the market.

Wright thinks the trust is aimed at the more cautious investor, whereas Both feels that: “The objectives of the fund sound reasonable enough, but the slow take-up rate reveals that it is not very popular with investors.”

Turning to the type of client that the trust is suitable for, Wright says: “High net worth clients with a speculative attitude and looking for tax mitigation.”

Gilbey thinks it is aimed at “a client with an adventurous risk profile and a significant portfolio.”

Hosking agrees, but feels that clients must be prepared to risk significant amounts of capital.

Both says: “Given the uncertainty which the Government has introduced into pensions by way of taxation, retirement age and annuities, I now believe VCTs should become part of mainstream retirement planning, in addition to the more conventional role as a marginal product for adventurous, capital-rich clients.”

Moving on to the marketing opportunities that the product provides, Marsh simply says: “Good in its sector.” Gilbey thinks that adviser&#39s should exercise caution when marketing the product, due to its perceived risk.

Both feels that there will be strong demand purely because it is the time of year for tax-advantaged products.

Wright has mixed feelings: “This will not be a front runner in my own recommendations, but may draw in money from people who have not yet used VCTs because of its broad investment philosophy.”

Hosking says that: “VCTs provide an opportunity for clients with significant capital sums to invest.

Considering the main useful features and strong points of the trust, Wright feels that the wide range of companies in which it invests is an advantage, while Marsh says: “Tax incentives from a reliable VCT manager.”

Gilbey and Hosking agree about the tax aspect, Hosking says: “The Downing product carries inherent tax advantages of VCT&#39s. It has predecessors in terms of investment strategy (Classic and Classic 2), and allows investment in current and next tax years.”

Both adds that, as well as standard VCT advantages, Downing&#39s contacts and the ability to purchase its own shares are plus points.

On the subject of the investment philosophy of the trust, the panel has a mixed opinion.

Hosking is positive: “Investment in the Classic VCT 3 will initially be made in fixed income securities, and then moved into start up technology companies and more traditional unquoted companies.”

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