Isis Equity Partners is seeking a £14m top-up investment for its baronsmead venture capital trust (VCT), allowing it to make between 10 and 20 additional investments.
This generalist VCT was established in 1995 and aims for long-term capital growth by investing in a portfolio of around 50 companies. Some of these will be listed on the alternative investment market (Aim). To date, the VCT has made 61 investments, of which 10 have been sold at a profit and nine at a loss.
The VCT managers take a top-down approach when selecting companies, looking at promising sectors before narrowing the focus down to individual companies. At the moment, sectors such as consumer markets, business services, IT support services, media and healthcare are regarded by the managers as good growth areas. Once a company has been selected, the VCT managers will work with the company to improve its management team and advise on mergers and acquisitions.
The VCT season has started early because the managers expect to have problems raising money. Poor stockmarket performance has reduced the capital gains people have made, so fewer will be looking at VCTs as a way of deferring capital gains tax. However, investing at this time may be attractive to some investors who are prepared to take higher risks for potentially higher rewards. Prices of unquoted companies are low and they have more scope for growth than larger companies.
According to Standard & Poors the baronsmead VCT is ranked sixth out of 17 VCTs based on £1,000 invested on a mid-to-mid basis with gross income reinvested over three years to November 4, 2002.