When asked about the investment philosophy of the company
Dilke-Wing says: “This is a complex area beyond the remit of most
advisers, including me. You either buy into the biotech philosophy
and accept the fact that you leave the stock selection to the
specialists, or you view it as a sector that is too speculative to be of
interest to all but a minority of clients.”
Burke calls the philosophy fine, but says that investments in this
sector which concentrate on new businesses should not be expected
to yield early results.
Upton says: "There is certainly a strong investment case on this
theme, so given the input of all those involved, the philosophy seems
Casting an eye over the drawbacks of the trust Burke says:
"Investments of this nature may take some time to bear
fruit." Upton is in agreement.
Dilke-Wing says: "The disadvantage of the trust is that it is
being promoted into a market where existing venture capital trusts
are already undersubscribed by approximately £200 m, by a relatively
unknown promoter into an undeniably niche investment
Looking at Octopus' reputation Upton says: "Unfortunately, I do
not know enough about Octopus." Dilke-Wing has also never
heard of them before.
Burke says: "I have no first hand experience of Octopus Asset
Management, but the background of the directors looks impressive,
with the founders formerly being managers and analysts with Mercury
Considering the trust which may provide the main competition
Dilke-Wing says: "There are a lot of trusts out there at the
moment, with, one assumes, a fair number waiting in the wings.
Notable competitors include Aberdeen, Electra, Pennine, Downing,
Isis, Baronsmeand and Quester."
Burke feels that in the current climate, more diversified general
venture capital trust funds are likely to attract a higher proportion of
the available investors funds.
Moving on to whether the charges are fair and reasonable Upton
says: "Compared to other products, the charges seem high,
with the investment manager and technology adviser both taking an
annual management fee. A performance fee for a 7 per cent average
seems incredibly low considering the optimistic claims made of their
past performance in the prospectus."
Burke says that at first glance some aspects of the charges seem
high, but he feels the technology advice fee will potentially also help
with the introduction of quality investment opportunities, and therefore
the total charges are realistic.
Dilke-Wing says: "Overall running costs on an annual basis are
high, particularly if there is not full take up. Performance fees appear
to be standard."
Commenting on the commission Burke says: "2.25 per cent
initial commission and a 0.25 per cent trail commission for the next
four years is reasonable but nothing great. Trail commission does
increase to 0.3 per cent or 0.4 per cent depending on the aggregate
total of business introduced by the adviser."
Dilke-Wing feels the commission is pretty standard for this type of
product. Upton says: "I think the commission is slightly on the
lean side plus trail commission finishes after four years – I cannot
quite see the logic there."
Considering the product literature provided Dilke-Wing says: "I
thought the product literature was very good. I would need a strong
story to be convinced to put money in this issue and, given the
obvious limitations, I thought the brochure put a coherent case in a
Upton calls the literature excellent and says he enjoyed reading it.
Burke says: "Given the constraints imposed on a prospectus of
this nature, the literature is quite readable."