Matrix Money Management is aiming to get ahead of its competitors by introducing a venture capital trust (VCT) that aims to produce a growing income for investors.
The cornerstone VCT will be managed on Matrix's behalf by GLE Development Capital, a venture capital company which has been managing VCTs since 1994. It will initially invest in a portfolio of gilts, fixed-interest securities and cash, which is expected to produce a yield of 2 per cent in the first year. This income yield is expected to rise to between 5 per cent or 6 per cent a year, when the money is gradually invested into small income-generating companies.
After three years, it is expected that 80 per cent of the VCT's portfolio will be invested in unquoted companies. Part of the portfolio will invest in preference shares and loan stocks, which produce higher dividends than investing in listed stocks.
The VCT will look for profitable well-established businesses that can prove they have growth potential over the next three to five years. They would also need to have strong management teams behind them and be capable of producing regular income for investors.
Many investors are currently looking for income, but are finding it difficult to meet their objectives in an environment of low interest rates and low returns from the stockmarket. This VCT, unlike the more usual growth-orientated VCTs, could meet those requirements.
However, potential investors in this VCT should be prepared for the higher risks associated with unquoted companies, which may not reach their full potential. These investors may be few and far between in the current environment of stockmarket volatility and uncertainty.