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VCT firms fear increase in risk

Matrix Private Equity Partners is concerned current draft proposals on venture capital trust changes could raise investment risk.

For funds raised on or after April 6, 2010, the Government proposes that VCTs have at least 70 per cent of their qualifying holdings in “eligible Shares”.

There will be a definition of “eligible shares” which is wider than the current definition and will include certain types of preference shares.

Currently, a single VCT investment can have maximum of 90 per cent loan stock and 10 per cent equity. The whole VCT portfolio as a maximum of 70 per cent loan/30 per cent equity.

Matrix Private Equity Partners chief executive Mark Wignall says: “Precisely what this all means remains unclear. Fundamentally, they are suggesting 70/30 as opposed to 30/70. What we do not yet understand is what constitutes equity. Until we have got our heads around that it is
too early to give a judgment.

“We are looking to contribute to the fine print. We would not welcome any definitive legislation that would make new VCT investment more risky. A number of us use loans as well as equity to reduce the risk when we make investment and anything that would make it more risky would not be a good thing.”

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