MATRIX MONEY MANAGEMENT
Foresight 2 VCT
Venture capital trust
Growth by investing in unquoted technology companies in the UK
Lump sum 2,500
April 5, 2005
Initial up to 5.5%,
Tel: 020 7292 0825
The Foresight 2 VCT is a venture capital trust investing in unquoted UK companies in the technology sector.
Arch Financial Planning managing director Arthur Childs points out that there are around 20 VCTs vying for attention and this number is expected to double by the end of the tax year. He says: “Only a handful of these are likely to provide substantial rewards for investors. This second technology VCT from Foresight is likely to be one of them.”
Childs says: “The original Foresight VCT is a good example of how clients can potentially benefit from investing in top performing VCTs provided they are left to mature. Someone who invested 10,000 at launch in 1997 now has an investment which has already returned tax-free dividends of around 16,500. They still have an asset worth a little over 8,000, which was the original cost to them net of tax relief.”
Childs thinks a key attraction of the approach taken by VCF, which manages the new VCT, is that it takes a lead role in the companies in which it invests and will often be the only outside investor. He says: “Investing in fast-growing unquoted technology-based companies in the UK is naturally high risk. However, many clients looking for rapid growth will feel more comfortable with this than putting their capital in the Far East or emerging markets. To counter the obvious risk Foresight will generally avoid start-up companies, concentrating instead on those at the development stage with a proven technological product looking to expand their market. The expectation is that as the UK economy begins to recover such companies will benefit significantly.”
Childs prefers the VCT’s focus on unquoted companies rather than Aim companies, which he predicts will become overpriced due to a large number of VCTs concentrating on that sector.
Consdering the drawbacks of the VCT Childs says: “I have no dislikes about the product itself and the marketing people have done a good job with the literature. My only concern is that if you are going to promote a technology VCT, particularly if you already have a highly successful one, it is not helpful to drop the technology label from its name. If it was done because it might put off some investors, I think those investors would have been better served by being put off in the first place.”
He believes competition will come from the Eclipse, Baronsmead and Oxford Technology 4 VCTs.
Suitability to market: Good
Investment strategy: Good