These venture capital trusts aim for growth and income through a diversified portfolio of small UK based companies, mainly those that are trading on Aim, which have the potential for significant growth. Hargreave Hale will also look at private companies and firms traded on Plus – formerly Ofex. A stock-specific approach rather than a sector specific approach will be taken and individual investments are likely to range from £100,000 to £1m.
The proceeds from the share offer will initially go in to gilts, other fixed interest securities, bank deposits that and equities until investments in Aim, Plus and small private companies are made. Around 20 per cent of the portfolio will remain in non-VCT qualifying assets.
When looking for suitable Aim, plus and private companies, Hargreave Hale will focus on an experienced and proven management teams, sound business plans and strong financial controls. The investment team typically has around 15 meetings a week with small companies, some of which are suitable for investment in the VCTs. The VCTs can also co-invest with Hargeave Hale’s other funds, which the firm believes should increase the quality and quantity of prospective deals.
New investors in these VCTs will gain access to mature investment portfolios comprising companies that would be difficult for a new VCT to hold now, as the Government has tightened up the investment criteria since the 2006/07 tax year. Qualifying companies are now subject to a £7m gross asset limit, must have no more than 50 employees and must not raise more than £2m through VCTs, enterprise investment schemes or corporate venturing funds in any 12-month period.
Aim companies are cheaper than bigger companies and investors stand to benefit when their share prices start to reflect the economic recovery. However, these investments are high risk. The Hargreave Hale VCTs may also face competition from the Noble Aim VCT, Octopus Aim VCT and Bluehone Aim VCT 2.