Isis Asset Management is raising up to £4m to top up its Aim VCT 2.
The objective of Aim VCT2 is to provide tax-efficient growth and an attractive dividend stream for investors. It was established in 2000 and has raised over £42m since launch. It invests mainly in companies listed on the Alternative investment market, with a smaller percentage going into companies set to list on Aim in the next 18 months.
The portfolio currently contains around 88 holdings and this is likely to increase to 90 when the money from this offering is fully invested. The managers feel that small unquoted companies currently offer good growth prospects as valuations are low, leading to strong gains when the market recovers. However, Isis will not to invest immediately if suitable opportunities cannot be found so it may take up to three years before the cash is fully invested.
When looking for companies to include in the portfolio, the managers will look at a range of sectors and the companies will need to show they can achieve profits growth. Isis believes smaller companies are attracted to Aim rather than the general stockmarket because the regulatory framework is more flexible
This VCT may benefit from recent changes to VCT tax breaks which allow investors to claim 40 per cent income tax relief over the next two years. However, it would be a mistake for investors to see a VCT as a tax-efficient vehicle without looking at the investment proposition. With this trust, investors are buying into an established portfolio and a good track record. But although Aim companies are less risky than pure unquoted companies, smaller companies can be risky and this VCT may be useful only for a small part of an investor's overall portfolio.
According to Standard & Poor's the Isis Aim VCT 2 is ranked eighth out of 22 trusts based on £1,000 invested on a mid-to-mid basis with net income reinvested over three years to May 24, 2004.