The Lacomp British Enterprise Fund 3 is an enterprise investment scheme fund that will invest in unquoted companies at an early stage of their development.
Lacomp was founded in 1985 by Peter Buxtorf to provide discretionary portfolio services for an international client base. It has created a third EIS fund because investing in a single EIS carries greater risks. A portfolio of EISs may still be high risk but the presence of more than one company can dilute this. As the previous two funds are now closed, a third was established to take advantage of the investment opportunities Lacomp has already identified.
The fund's objective is to provide capital growth over a period of three to five years. An investment advisory panel, headed by Buxtorf, will construct the portfolio. The panel includes Simon Pannet, head of corporate finance at Beer & Partners, which specialises in raising money for small and start up companies.
The panel hears about potential investments from a variety of sources including direct approaches and through contacts. When a company looks promising, there will be an initial appraisal, which is designed to see whether it is worthwhile paying for full due diligence.
The panel aims to find companies with a good management team behind it, strong cashflow and are experiencing a growing demand for its products and services. Selected companies are monitored through monthly progress meetings and Lacomp will then look for best exit strategy from the company. This may be a flotation to Aim or Ofex, a management buyout or liquidation and the sale of assets.
The diversification achieved by this EIS is the main benefit of this fund. However, the drawback is that because investors' original capital is divided among more than one company, smaller amounts are invested which could dilute the returns if one is more successful than another.