Bestinvest in warning on investment in VCTs

Adrian Lowcock, senior investment adviser for London-based broker Bestinvest, said people needed to use caution with the tax-effective investment vehicle.

Speaking as the government pressed ahead with plans to change feed-in tariffs for solar panels which might affect the more esoteric VCTs that invest in energy companies, Mr Lowcock said there were many external factors to be considered before investing in a VCT.

He said: “The strong performance of VCTs in 2011 is welcome news for investors but they should check the facts before they decide to invest.

“Share price performance is one thing but the price relative to net asset value is the most important factor governing performance of the share price of VCTs.”

Mr Lowcock said investors should pay attention to the likely duration of the investment. For example, four of the top-five performing VCTs were run by Maven Capital Partners, which has no buy-back policy. This means only investors who can afford to should remain tied up in the investment until the management decides to start a buy-back.

He added: “We prefer managers who have consistent strong performance on VCTs and a strong buy-back policy. For us, Matrix Asset Management, Baronsmead and Northern all tick this box.”

Mr Lowcock said investors should also consider whether they wanted a specialist or a general VCT, adding: “The VCT which held the top spot in 2011, Foresight VCT, is a technology specialist and, in our view, sits at the racier end of the VCT market.

“As such the share price and NAV may be volatile but we believe the management team at Foresight is excellent and knows its market very well.

“The tip with VCTs, as with any investment, is know what you are buying.”