Venture Capital Trusts face a 75 per cent fund raising reduction if they are caught by the Ucis rules, according to research from Bestinvest.
In August, the FSA revealed it is planning to ban the promotion of unregulated collective investment schemes to retail investors, with promotion limited to sophisticated, high-net-worth individuals. While VCTs are not specifically mentioned by the rules, they are not given a specific exemption, unlike investment trusts.
Earlier this month, Money Marketing’s sister publication Fundweb revealed that the Association of Investment Companies warned its members that VCT shares may be caught by the rules.
The Bestinvest survey indicates that if this restriction is applied to VCTs, managers are on average bracing themselves for a reduction in VCT fund raising of at least 75 per cent. The management groups also indicated that as little as 25 per cent of the businesses they have financed have the option of going elsewhere.
VCTs have attracted £1bn of investor assets in the past three years.
Bestinvest estimates that this could lead to a potential annual shortfall of circa £200m in funds available to small British businesses.
Bestinvest managing director of business development and communications Jason Hollands says: “It is clear from our survey that VCT managers are highly concerned about the potential impact of this proposal on their ability to raise new funds.
“This in turn could choke off a valuable source of funding for small enterprises at a time when bank lending remains scarce and the UK is trying to claw its way out of recession. These are the sorts of businesses we need to succeed to get the UK economy moving again.”