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Dover Street enters VCT neighbourhood

Dover Street Capital, a specialist venture capital and investment advisory firm in London, has brought out the Dover Street venture capital trust which will have a fixed life of six years.

The company has raised over 60m in the past there years mainly through film financing but is now applying its skills to a VCT. The directors are aiming this offering at the lower risk end of the spectrum and have taken steps to minimise the risk to capital associated with unquoted companies.

The companies selected for the VCT will need to be established, profitable companies with strong customer bases, reliable cash flows 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 at the heart of the VCTs investment strategy is the intention to liquidate the portfolio within six years, allowing investors to realise their investment without having to sell their shares on the open market.

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

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

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

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