Downing Corporate Finance is raising up to £10m to top up the Electra kingsway venture capital trust (VCT).
Electra kingsway was established in September 2001 and is managed by Electra Partners. It invests in a portfolio of unquoted and developing companies that are listed on the alternative investment market (AIM). So far, it has invested in four companies at a total cost of £2.5m.
The top-up investment will allow the VCT to invest in more companies with high growth potential when prices are low. The companies will need to have good business plans and show there is demand for their products and services. They must also show profitability and have adequate capital to support their business plans. Investments in start-ups will be avoided because they are perceived as too risky.
The money raised by the VCT will not be immediately in unquoted and AIM-listed companies. It will first go into the Electra investment trust, which is contained in the venture and development capital sector, the Electra active management Oeic and a portfolio of fixed interest securities. It will then be transferred when suitable investment opportunities in unquoted and AIM-listed companies are identified.
This VCT could appeal to investors with less money to invest, but who want exposure to companies at an early stage of development as part of a wide portfolio. However, investor confidence has been affected by volatile stockmarkets and some investors may be reluctant to invest in developing companies because they are riskier than quoted companies.
According to Standard & Poor's, the Electra kingsway VCT is ranked fourth out of 25 trusts based on £1,000 invested on a mid-to-mid basis with net income reinvested over six months to November 29, 2002.