TEATHER & GREENWOOD
Aim: Growth by investing in companies quoted on Aim, unquoted companies, cash and fixed interest securities.
Minimum investment: £3,000.
Opening-closing date: November 19, 2001-April 4, 2002 for 2001/2002 tax year, May 31, 2002 for 2002/2003 tax year.
Charges: Initial 5 per cent, annual up to 1.75 per cent.
Commission: Initial 2.5 per cent, renewal 0.25 per cent.
Tel: 020 7426 3204.
Investment philosophy 6.8
Past performance 4.0
Company's reputation 7.0
Product literature 6.5
The panel: Godfrey Bloom, Investment director, TBO Corporate Benefit, Scott Clayson, Principal, Professional Financial Services, Stuart Smith, Deputy managing director, RJ Hurst & Partners, Kenneth Ball, Proprietor, K J Ball Financial Services.
Teather & Greenwood has established its first venture capital trust (VCT), the Teather & Greenwood Alternative investment market (Aim) VCT. It will invest mainly in companies quoted on Aim that have above-average income and growth potential.
Considering how it fits into the VCT market Ball says: “It is a good fit, with the help of holding 25 per cent in fixed-interest securities. This will maintain bedrock income for the management of the portfolio investments.” Clayson suggests it is a good alternative to Aberdeen and Friends Ivory & Sime VCTs.
Bloom says: “There are a number of Aim trusts as opposed to generalist trusts, although pure Aim stocks are relatively few.” Smith says: “It is yet another VCT launch into what is rapidly becoming an over-crowded marketplace. There are too many trusts chasing what is, this year, likely to be a fairly small investment pool.”
Identifying the type of client it is likely to attract Bloom says: “Clients capable of high-risk tolerance and those rolling over capital gains tax.” Ball says: “Mainly higher-rate taxpayers with a higher-risk profile investing over the next three to 10 years. And higher-risk growth investors.” Smith highlights sophisticated investors, either higher-rate taxpayers looking to generate tax-efficient income in the future or those with capital gains to shelter. Clayson says: “The client who wishes to defer a capital gains tax liability into the future and who is prepared to take a high risk with a portion of his investment.”
Looking at the VCT's marketing potential, Clayson sees it as an alternative to the Aberdeen and Friends Ivory & Sime trusts if they become fully subscribed. Bloom thinks it will have marketing appeal for those seeking capital gains tax mitigation, while Smith says: “We have a mailing list of clients who have expressed an interest in new VCT launches so it could be marketed to them.” Ball says: “It is a tax-efficient higher-risk investment which is limited to higher taxpayers and those persons looking for some spice in their lives and who are able to afford at least £3,000 to gamble.”
Highlighting the strong points of the VCT Clayson says: “The fund manager, John Sweet, produced an excellent performance when he was at Invesco Perpetual. VCTs also provide capital gains tax deferral up to 40 per cent and income tax relief up to 20 per cent.” Ball says: “It has good management past performance and potential. The minimum investment is only £3,000 and the market price will be published on the main London stock exchange. Up to 25 per cent will be maintained in fixed-interest securities. Investors receive tax-free income, dividends and potential capital distributions. The fund manager has to make it happen to gain a bonus and is able to invest during a low period in the Aim market index.”
Bloom feels it has all the usual VCT bells and whistles, while Smith says: “Teather & Greenwood is clearly associated with Aim which should bode well for the trust. The initial holding in fixed-interest stocks will probably be attractive to clients at present.”
Discussing the investment strategy Ball says: “I like this philosophy as it combines an income stream with investing in well-researched innovative companies and the ability to co-invest in larger investments.” Clayson says: “It is risky but at this time, when the market is low, it could provide high rewards.”
Bloom says: “I like Aim stocks where there is a quoted value. There will not be too much exposure to non-listed companies.” Smith says: “Personally, I believe that the best returns from unquoted shares are made before they reach Aim, so this trust will miss out on the most spectacular gains. But equally, the additional liquidity appeals to many clients who would otherwise be deterred by a portfolio exclusively made up of unquoted shares.”
Considering the disadvantages of the VCT Clayson says: “It is too risky for most people. A new fund manager may put off people who could use Aberdeen or Friends Ivory & Sime instead.” Ball points out that it is higher risk and that clients must retain the shares for three years to ensure tax advantages. He adds that investment opportunities have to be identified and that there are no guarantees for the investment or return.
Bloom says: “It might not get fully subscribed as there have been few capital gains this tax year for most investors.” Smith says: “The fixed-interest holdings are likely to act as a drag once the market shows signs of recovery. In addition, by concentrating on Aim stocks, the trust will miss the potentially explosive returns of private equity.”
Assessing Teather & Greenwood's reputation Smith says: “The company is little-known to the IFA community, but it would appear to be well-regarded by those closely involved with smaller company shares and Aim companies in particular.” Ball says: “It has a good reputation as a sound and competent investment manager.” Bloom feels it has a strong record in this field with good past analyst research.
Moving to the company's past performance record Smith says: “There is little information to go on, but certainly the lead fund manager had an excellent track record when at Invesco Perpetual.” Ball says: “I consider its investment past performance to be in the upper quartiles and well worth a punt.” Bloom says: “A strong management team with a proven track record in small companies.”
Identifying the potential competition Bloom says: “Friends Ivory & Sime and Close Brothers have strong Aim teams. At TBO, we only back teams who have specific experience of this field.” Clayson mentions Aberdeen and Friends Ivory & Sime. Ball says: “Matrix offers broad competition. Also there are independent stockbrokers raising funds for specific clients. Property trusts also provide potential with shorter risk.” Smith goes for Artemis Aim VCT, Unicorn Aim VCT and Questor 5 VCT.
The majority of the panel feel the charges are reasonable but Smith says: “The initial charge is fairly standard at 5 per cent but the trust will be charging 2.7 per cent a year assuming full subscription. This seems a little on the high side, particularly as it does not appear to be performance related.”
Most of the panel also feel the commission is reasonable, but Clayson says: “At 2.5 per cent, it pays less than Aberdeen and Friends Ivory & Sime, which pay 3 per cent. Although commission is not a priority when reviewing a VCT, why not equal the competition?”
Looking at the product literature the panel are favourable on the whole. Clayson says: “It should offer examples of the type of company the trust will invest in. Otherwise, it is good quality literature.” Ball says: “It is attractive, businesslike and easy to read. Just what you would expect from a company of this calibre.”
Smith says: “Clear and concise. It seems to have cut out much of the small print which usually appears in a prospectus. At the same time, the summary guide is well-written and clear.” Bloom thinks it is good.
Summing up, Smith says: “I think this VCT will have trouble reaching maximum subscription as it suffers from a low profile and there are other better known offerings available.”