Until recently, the firm had four Aim VCTs but has reduced this to two following the mergers of the Aim VCT with the Octopus Phoenix VCT and the second Aim VCT with the IHT Aim VCT. The firm felt that the interests of new and existing investors would be best served by creating two bigger VCTs that would reduce costs through economies of scale. The firm also says the newly merged VCTs also have an increased ability to maintain liquidity for dividends and share buy-backs, and provide greater diversity due to their size.
The VCTs will use the proceeds from this top-up to benefit from rallies in valuations and smaller company performance as economic growth takes off in the UK. It believes investor risk appetite will return once there is greater confidence in the UK economy’s move out of recession.
The AIM VCTs are managed by Andrew Buchanan and Kate Tidbury, who joined Octopus from Close Investments in 2008. They will invest for income and growth in a portfolio comprising 80 per cent small unquoted UK companies across a range of sectors that trade on Aim or Plus markets, or those that are expected to trade on these markets in the short to medium term. The remaining 20 per cent can be invested in a UK smaller companies fund managed by Octopus or directly in equities and bonds to provide liquidity.
The VCTs could be attractive because they provide immediate exposure to an existing portfolio, unlike new VCTs or C-share offers. Octopus says the recent increase in takeover activity highlights the value in the Aim market. It believes Aim and Plus companies are similar to emerging markets, without any of the currency or political risk associated with overseas investment.
However, VCTs can only invest in firms which have gross assets of less than £7m and less than 50 employees, which could restrict choice when investing new money.