Lifting the bonnet on VCT & EIS investment

Seneca Partners’ annual adviser roundtable lifts bonnet on VCT & EIS investment

Investors need clarity on valuations, exits and fees to make informed choice

Seneca Partners (“Seneca”), the specialist SME investment business based in the North West, has published a whitepaper on VCT and EIS investment, resulting from an annual roundtable with advisers, reviewers and media at the end of last year. The full whitepaper written by Scott Longley at Clear Concise Media is available here.

An unequivocal conclusion is that the future looks bright for VCT and EIS investment, as the need to encourage innovation and entrepreneurship in the British economy is as vital as ever. Recent government reassurances around the regulatory backdrop for tax-advantaged investments should see investment in VCTs and EIS continue their growth path despite the economic headwinds.

However, the discussion did highlight some key areas where ambiguity is caused by differences of approach between providers, making the selection process for advisers and investors less straightforward and transparent than it could be.

Issues around investment time horizons, diversification, investor involvement and liquidity all have to be understood by both the adviser first and then explained to the investor.

Equally important for the adviser to fully understand are the clear differences in approach on the part of providers. From questions about investment process through to the nuances around valuations, exits, AIM investment and fees, investors and advisors need to be aware of the many aspects of what any given provider offers before making an informed decision.

Attending the roundtable Hugh Rogers, Director at the Tax Efficient Review discussed the effort to measure how funds are performing, citing track record and profitable exits; “We put weight on that. But we also take time to understand what has driven their valuations.” On the issue of valuations of the underlying investments he noted that AIM company valuations are “easy”, whereas with unquoted companies it can be a “minefield”. Of the measurement metrics he uses he went on to add; “Lastly it will be fees. We don’t like to see performance aligned to NAV; rather it should be aligned with returns to investors.”

It is clear that VCT and EIS continue to be a vital source of crucial funding to support the growth of British enterprise. Those looking to put their money to work within a VCT or EIS need to find a provider that is closely aligned with the drive for economic growth.

Richard Manley, CEO at Seneca Partners concluded: “VCT and EIS provide vital growth investment and support to the UK’s SMEs, which is crucial as we seek to return the UK economy to a period of sustained economic growth. The roundtable provided the opportunity to hear from advisers and reviewers on the issues investors need to consider in order to make an informed investment decision.

 

Important notice

The contents of this website are a financial promotion and are approved by Seneca Partners Limited of 9 The Parks, Newton-le-Willows WA12 0JQ.

The value of an investment in the Seneca Capital Growth VCT plc may go down as well as up, in which case an investor may not get back the amount invested. The share prices quoted may not reflect the VCT’s net asset value.

Seneca Growth Capital VCT plc’s investments include holdings in private companies which are small and which carry an above-average level of risk to capital and whose shares may not be readily marketable. It also invests in companies quoted on the Alternative Investment Market (AIM) of the London Stock Exchange (LSE) which is generally for smaller, emerging companies and carries a higher level of risk to capital than the main market of the LSE.  The past performance of Seneca Growth Capital VCT plc is not a guide to the future performance.

Any tax reliefs available to investors are dependent on personal circumstances and may change in the future. The tax reliefs available to certain investors in Seneca Growth Capital VCT plc are dependent on the VCT maintaining Inland Revenue approval. If this approval is withdrawn, the VCT will lose its status and all tax reliefs are likely to be cancelled. Investors must retain their VCT shares for five years to retain the up-front income tax relief. The tax rules and regulations governing VCTs are subject to change.

An investment in Seneca Growth Capital VCT plc may not be suitable for all investors. Investors should seek advice from a qualified financial adviser. Nothing on this website should be construed as investment or tax advice.

Seneca Partners Ltd is authorised and regulated by the Financial Conduct Authority.