Friends Ivory & Sime has established the Isis technology venture capital trust (VCT) to take advantage of undervalued technology companies in the UK.
This VCT will be managed by Stephen Grant and Glen Nimmo. Grant currently runs the Ivory & Sime UK smaller companies investment trust and shares responsibility for the discovery trust with Nimmo. Nimmo is also involved with the Ivory & Sime Isis investment trust.
Grant and Nimmo will have three years to invest at least 70 per cent of the funds raised in unquoted technology companies. Up to 30 per cent will immediately go into a portfolio of quoted technology companies and fixed-interest securities.
The unquoted companies will be companies that own the rights to innovative technology, companies that use technology in a business-to-business environment to help other firms get ahead of the competition and companies that use technology to enhance their own products. Investments in each company is expected to be from £150,000 to £1m and the portfolio is expected to have 40 holdings.
Technology is felt to be a good growth prospect because the correction following the technology boom has left some companies looking attractively priced. However, some investors may be put off this VCT by the high risks involved despite the potential for high returns.
It is also not enough for a technology company to develop a good product. There must be a market for it and the fund managers will have to ensure their assessment of this is spot on when trying to predict which companies are likely to fulfil their potential.
According to Standard & Poor's, the Ivory & Sime UK smaller companies trust is ranked 15 out of 29 trusts based on £1,000 invested on a mid-to-mid basis with net income reinvested over three years to December 10, 2001.