The Gresham House Income & Growth VCTs (formerly Mobeus) have launched an offer for up to £95 million (£65 million + £30 million overallotment).
The VCTs have total net assets of £338.5 million and a portfolio of around 50 companies.
The Gresham VCTs have historically delivered the best returns of any VCT.
Why VCTs are worth investing in.
The investors who could gain the most by investing in VCTs.
Alex Davies, CEO and Founder at Wealth Club said, “The Gresham House VCTs are among the most popular VCTs in the market – raising £27.7 million in just 24 hours the last time they were open.
It’s not hard to see the draw for investors. Over five years the VCTs have returned a respectable 31% on average, not a bad result during a tough period for venture investments and UK smaller companies more generally. However, over ten years the two VCTs have averaged 115% – the best return of any VCT.
The VCTs recently upped their dividend target, and now aim to pay out the equivalent of 7% of NAV every year. That’s among the most generous of all VCTs dividend policies – which will only add to the VCT’s appeal.
Put all that together with a cut in VCT income tax relief from next year and it wouldn’t be a surprise to see the Gresham VCTs fill-up faster than ever this year. For investors looking to lock in a Gresham VCT investment with 30% tax relief it will pay to act quickly.”
Why VCTs are worth investing in
‘Most investors are initially attracted to VCTs for the tax breaks, and they are generous. Investors can get up to 30% back in income tax relief up front, falling to 20% next tax year, any dividends paid by the VCT are tax free and growth is free of capital gains tax too.
However, VCTs are more than just a tax planning tool. They’re probably the best way for UK investors to access fast growing smaller companies. Revenue growth from VCT investees far outstrips what you see in main market listed companies, and the result has been some attractive returns for investors over the longer term.
Exposure to high growth, smaller companies also has the potential to diversify a conventional portfolio. Long-term performance is often only loosely correlated with the wider economy. Highly disruptive businesses grow by taking market share from incumbents rather than relying on market growth.
The rules governing VCTs mean they’re also an excellent way to back smaller businesses. It’s their role providing support to the next generation of UK start-ups, driving innovation and creating jobs, that earns them the tax relief from the government – and many investors feel that this is something they wish to support too.
Who should consider them?
VCTs are higher risk, and while they’re listed on the stock market, in order to qualify for tax relief investors must hold the shares for at least five years before selling – making them inherently long-term investments. Unlike most conventional funds and shares the minimum amount you can invest is comparatively high – often £3,000 or more. All of this means they are best suited to wealthier or more sophisticated investors.
VCTs are popular with two groups in particular.
The first is higher earners or wealthier investors who are limited in what they can put into more mainstream tax wrappers. For example – those who already use full £20,000 ISA allowance or whose pension contributions are tapered due to the amount they earn. The £200,000 a year annual VCT allowance is generous and can save higher earners up to £60,000 in upfront income tax (£40,000 next tax year).
Interest is also high with those in, or near, retirement who use VCTs’ tax free dividends to supplement income from other sources. Because they’re higher risk, VCTs shouldn’t be considered a replacement for a pension, but they can help to top-up income from more conventional sources.
