As established VCTs, Ingenious entertainment VCTs 1 and 2 have built up a track record. Four summer festivals in which the VCT invests generated a combined profit of £880,000 last year. The Taste festivals in which it invests attracted strong attendances and the two-day dance music event Creamfields sold out, so it is looking to expand capacity from 30,000 each day to 40,000 this year.
The directors aim to use the five-year life of the VCT to develop each investment with the aim of building a brand that can be sold to a third party. The strategy was used in the Ingenious Live VCTs and should provide liquidity for investors.
VCT manager Paul Bedford says there is a clear mission statement in getting the capital back to the investor. He starts looking at ways to exit investments from about three and a half years and says there have already been approaches from third parties who are interested in buying some of the events.
Bedford and his team will aim for diversity in the portfolio but as each investment is assessed on its own merit and commercial viability there are no sector limits. Risk to investor’s capital will be limited by the requirement that each company has pre-sales or similar minimum revenue arrangements covering at least 75 per cent of the VCTs’ investment.
Each company must also have an experienced producer or promoter with a proven track record and relevant insurances in place to protect against the usual industry risks.
This VCT will suit investors who are looking to benefit from VCT tax advantages but who want the ability to get their money out after five years. The focus on capital preservation through the pre-sales or similar arrangement to cover 75 per cent of the investment should lower the risks inherent in venture capital, as it limits losses, but some failures in the portfolio are inevitable.
Ingenious says it lost 12 per cent of its money through a music event at Powderham Castle. However, it adds that the more successful 80s Rewind Event came out of the 80s party that formed part of Powderham failure.