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Venture trusts double take to reach £340m

Venture capital trusts raised a total of £340m in the last tax year, more than double the £158m raised in the previous tax year, according to figures from the Association of Investment Companies.

The £340m raising is the fourth highest since VCTs were first launched in 1995.

Separate research by Martin Churchill, editor of Tax Efficient Review, found that IFAs who had recommended VCTs during the 2009/10 tax year were mainly those who had previously recommended them rather than IFAs who were new to advising on the investments.

Churchill gathered figures from subsets of VCT providers representing over 80 per cent of the market which shows that, on average, 32 per cent of new money in VCTs came from IFAs who had already invested clients in the market.

Only 13 per cent on average came from new IFAs. Discount brokers accounted for an average of 30 per cent of VCT funds. Banks, wealth managers and private banks together contributed an average 15 per cent and direct investors 10 per cent.

The record raising for VCTs was £779m in 2005/06.

Churchill says: “Of interest is the small percentage of funds invested by IFAs new to VCTs. If the market is to grow this tax year then a new set of IFAs will need to be introduced.

“The market is getting a bit mature, we need a new story which will be the 50 per cent tax rate and specialist green/clean technology.”

AIC director general Ian Sayers says: “This year’s impressive fund-raising will increase VCTs’ capacity to support companies which find it difficult to raise development capital. It is particularly valuable, given banks’ continued reluctance to lend to small businesses.”

Hargreaves Lansdown investment manager Ben Yearsley believes that tax changes which have targeted high-earners have boosted the investment vehicles. He adds: “This year’s return was been boosted by the changes in pension and tax regulation. High-net-worth investors are now more concerned about the effect of this and view VCTs as a viable alternative.”

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