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Dover Street changes focus

Dover Street Capital, a specialist venture capital and investment advisory firm based in London, has raised over 60m in the past three years, mainly through film financing. It has now brought out a venture capital trust, which will have a fixed life of six years.

The directors are aiming this VCT at the lower-risk end of the spectrum and have taken steps to minimise the risk to capital associated with unquoted companies.

Companies selected for the VCT will need to be established, profitable companies with strong customer bases, reliable cashflows and strong asset backing.

They will be selected on their ability to provide an income and will also need to convince the VCT managers that their investments are likely to be realised within six years. This is because it is intended to liquidate the portfolio in six years, allowing investors to realise their investments without having to sell their shares on the open market.

Dover Street Capital’s directors point out that VCTs usually trade at a discount to their net asset value and they believe an orderly liquidation of the portfolio will provide higher returns than the sale of shares on the open market.

Another way that the VCT will minimise risk to capital is to fund investments in unquoted companies using a combination of loans and equity investment.

This VCT’s fixed life and the thought it has given to providing an exit for investors make it stand out from the crowd of VCTs which have been launched as a result of enhanced income tax relief. However, with so many established VCTs allowing top-ups, it may be difficult for a newcomer to raise money.

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