Octopus investors are facing huge losses after an EIS marketed as low risk bled more than £8m over four years.
Around 170 people invested £18.3m in Octopus EIS 2. The investment vehicle has almost halved in value since 2011, with nine out of 10 firms losing money.
The EIS invested in the media industry, including unquoted film and music rights companies, between February and April of 2011.
The firm no longer invests in the media sector.
Octopus business line manager for EIS John Thorpe says: “We take safeguarding our investors’ money extremely seriously and are clearly very disappointed by the performance of this tranche of EIS.
“At the point of investment we promise our investors that we will not take our annual management charges on the Octopus EIS portfolios unless we are able to return at least the money they initially invested into their holdings.
“We’re absolutely committed to doing the right thing for our investors and, in line with our commitment, will be waiving this fee, while continuing to work hard to make sure that those affected receive the best possible outcome from their investment.”
Octopus received net initial fees of 2.5 per cent for EIS 2.
Hargreaves Lansdown senior analyst Laith Khalaf says: “I find it hard to see how an EIS can be described as lower risk with a predictable return while investing in start-up companies. Investors and advisers are attracted to these products because of the generous tax breaks but they need to spare more than a though for the investment proposition too. It is important not to let the tax tail wag the investment dog.”