The directors say live music and other events are characterised by immediacy, so it anticipates that returns will be generated quickly after an investment is made, then reinvested to enhance returns and liquidity.
According to market research from Mintel, the live music and festival market rose in value from £475m in 1999 to £613m in 2004, and a further increase to £836m by 2009 is predicted. The directors of the Edge VCTs see Mintel’s figures as evidence that the outlook for live music is more positive than that of the recorded music industry, which is experiencing a decline.
Consequently it believes this industry will provide good investment opportunities within a specialist VCT.
A double offering was developed to allow the VCTs to invest in parallel, with investments in each company up to £2m instead of the usual £1m for a single VCT. The VCTs will build on the existing agreements with two established promoters, AEG Live UK, and SJM.
The investment team includes high profile promoter Harvey Goldsmith, who was responsible for events such as Live Aid and Live 8, and Gordon Power who founded the private equity business of ProVen, now Beringea. Money raised through the offer will initially go into fixed income securities managed by Rothschild Private Management.
The first Edge Performance VCT raised over £6.25m in the last tax year and is attracting live opportunities from the wider sector such as theatre and spin-off opportunities such as DVD.
The VCTs will continue to invest only in event promoters that have negotiated an event licensing agreement with an established event promoter. These arrangements speed up access to events, artists, venues and ensure unnecessary risks are not taken with investors’ capital as guaranteed minimum returns often form part of the arrangements.
This VCT offer may appeal to people looking for a tax-efficient investment that fulfils demand for capital growth and another on capital preservation. Steps have been taken to reduce risk, such as making the investments through loan finance and the agreements with AEG and SJM. However, returns may still be affected by the popularity of the events and other factors outside the promoters’ control.