The board believes it is in the best interests of the existing shareholders to raise more money for new investments, which will help spread the trusts running costs over a wider base. They also feel there will be interest from new investors because the temporary enhancement to income tax relief is expected to end at the next budget.
The VCT is a generalist trust which was established in 1998. It invests mainly in established and profitable unquoted companies and, to a lesser extent, in Aim companies. At launch it raised 15.1m and a further 1.5m was raised through a C’ share issue earlier this year
The lead manager for the VCT is Barnaby Terry, who joined Elderstreet in 1998. Prior to this he spent five years at 3I and in total, has invested in more than 40 companies. Terry and the rest of the team will identify companies with good management teams that are looking for development capital or funding for a management buy-out. It will span a range of sectors and will draw on the retail, media and private equity experience of the board.
For investors the advantage of buying new shares in an existing VCt, as opposed to a new launch or a C share issue is that new investors get access to a fully invested portfolio at the outset. It also takes the pressure off the managers when looking for suitable qualifying investments, as most of the portfolio will be invested.
Data from Trustnet ranks the Elderstreet VCT at 14th out of 17 generalist VCTs in the five year period up to November 2, 2005. It produced a 48.8 per cent return over the period compared with the sector average of 7.9 per cent and the top ranking Close Brothers VCT, which produced a positive return of 129.5 per cent.