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VCTs boom but IFAs still wary

Despite a surge in inflows work needs to be done to demystify the VCT market for investors, says Isis Equity Partners chairman David Thorp.

He says the 40 per cent income tax relief is boosting VCTs. Over 150m has been taken by the end of December 2004 and Thorp is predicting that demand by the end of the tax year could exceed 400m, compared with just 60m in the last tax year.

But the adviser base recommending VCTs still seems to be focused on investment specialists.

Thorp thinks that VCTs are often perceived as investing in young, fast-growth companies, which associates them in the minds of investors with high risk. He says: “There is a wide range of investment approaches on offer in the VCT market, which in turn results in a wide range of risk profiles.”

Atkinson Smith financial development manager Will Palmer says: “VCTs are a bit on the weird side for us. With the climate as it is at the moment, we have found that clients want safe investments. We have found there is enough to play with in terms of more traditional asset allocation and we would prefer to tread the ground that we feel comfortable on. Unless someone can demonstrate to us exactly how to go about investing in VCTs and how to make them work, they are not an area that we would recommend despite the tax benefits.”

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