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Octopus picks up on bioscience

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&#39 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

Asset Management."

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

concise fashion."

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."


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