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Generalist angle from Downing Electra

Downing Corporate Finance is raising up to 40m for the Electra Kingsway VCT 2, a generalist venture capital trust managed by Electra Quoted Management, a subsidiary of Electra Partners.

Electra Quoted Management specialises in private equity investment and was established in 1981. It manages the Electra Kingsway VCT which was introduced in September 2001. As at August 31, 2004, the VCT had made 17 investments in qualifying companies at a total cost of over 11m.

This second Electra VCT was established as a result of the increased upfront income tax from 20 per cent to 40 per cent over the next two years. It will have the same investment strategy, directors and investment team as the original Electra Kingsway VCT.

The money raised from the share issue will initially go into the Electra investment trust, the Electra active management Oeic, a portfolio of fixed interest securities and cash. During the next three years, it will gradually be invested in a portfolio of around 30 unquoted and Aim-listed companies.

The companies chosen will mainly be established companies rather than start-ups. They will have solid business plans, good management teams, the ability to generate profits and must demonstrate a strong demand for the products or services they offer.

Many VCTs have been established recently as a direct result of the enhanced income tax relief, but some focus only on Aim-listed companies. The investment team at Electra believe Aim companies are currently overvalued and the investment strategy of this VCT allows them to invest in Ofex and unquoted companies while they believe this is the case.

This degree of flexibility is unavailable to VCTs focusing entire on Aim companies and the Electra investment team may find it easier to find qualifying investments with good growth potential because they are not restricted to Aim companies.


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