Puma Investments has launched a new Alternative Investment Market inheritance tax service.
The discretionary portfolio service aims to deliver long-term growth to investors whilst also mitigating inheritance tax, by investing in Aim-listed companies that benefit from business property relief, meaning investments receive 100 per cent relief from inheritance tax after a holding period of two years.
The service is available in Isas, with a £15,000 minimum investment in line with the current annual allowance reflecting the fact that Aim stocks can now be held within Isas.
Justin Waine, the service’s investment director, told FTAdviser that as opposed to other IHT-focused strategies in the market, he is looking for cash generative, quality companies with strong margins and proven track records of sustainable returns.
Companies will be selected by applying strict valuation criteria focusing on capital preservation, with the portfolio typically comprising 20 stocks with a minimum market capitalisation of £50m and a target holding period of three to five years.
David Kaye, chief executive of Puma Investments, said this approach would be much more likely to take advantage of next April’s rush to use tax free lump sums, as more people at retirement will be looking to focus on capital preservation.
He said: “I definitely think there will be a spike in interest with the pension reforms coming in next Spring, but I’m not sure this will work so much in the favour of the more high growth venture capital trust side of the market.
“Advisers and wealth managers are already looking for solutions for clients that will soon be able to drawdown large tax-free lump sums, but once that is taken from pension pots it will be sitting in cash and becomes inefficient from an inheritance tax standpoint.
Mr Kaye admitted that “we are definitely taking risk by investing in Aim stocks, but our strategy minimises risks in line with people looking to our service for capital preservation rather than betting on the next big thing”.
The service comes with an initial fee of 2 per cent for investments less than £500,000, falling to 1.5 per cent for investments between that amount and £1m, then 1 per cent for those putting in £1m or more.
Similarly, the annual management fee is 1.5 per cent for less than £500,000, 1.25 per cent for £500,000 to £1m and 1 per cent for £1m or more. A dealing fee of 1 per cent also applies.
peter.walker@ft.com
