Surging levels of venture capital trust applications could leave some investors unable to access their chosen funds, according to analysis from low-cost investment provider Clubfinance.
The company said many VCTs may close sooner than anticipated because they are on track to meet fundraising targets well before the end of the tax year.
For instance the Maven Income & Growth 4 has just closed after reaching its fundraising target, while the Maven Income & Growth VCT has already reached 70 per cent of its quota.
Several other generalist VCTs have also raised a significant proportion of their funding targets, including Elderstreet VCT at over 80 per cent and British Smaller Companies VCT and VCT2, both at over 40 per cent.
Many Alternative Investment Market VCTs have also raised a large proportion of their target, including the Hargreave Hale Aim VCTs 1 (41 per cent) and 2 (42 per cent), Octopus Aim VCT (65 per cent) and VCT 2 (55 per cent), and Unicorn Aim VCT (64 per cent).
Last month FTAdviser warned that there may be a supply and demand mismatch in the coming months, with Mobeus Equity Partners chief executive Mark Wignall suggesting that the supply situation has “caught a few people off guard”.
Mr Wignall said heightened demand was “becasue there’s been decent performance, some greater comfort around the risk profile of products, low returns on alternatives and clampdowns on unapproved tax avoidance schemes.”
Clubfinance’s VCT inflows are up more than a third on the same period last year and the broker has taken more than £3m in the first few working days of 2015 alone.
Director and co-founder David Scrivens reiterated points made in December by noting that capacity is tighter than it has been in previous years, with large fund raisers such as NVM - manager of the Northern VCTs - not launching an offer and Living Bridge - manager of the Baronsmead VCTs - only expected to launch a small offer.
“Anyone planning to make a VCT investment, or considering doing so, might want to think about acting sooner rather than later or they may find their preferred VCT is no longer open if they wait until March.”
Mr Scrivens added that reductions in pension contribution allowances have driven higher investment levels in government-blessed tax-efficient investments such as VCTs over the past few years.
“More recently, increased scrutiny of aggressive tax practices and schemes that use loopholes to avoid taxes, including the levying of heavy penalties and fines against investors, are also driving flows into VCTs.”
peter.walker@ft.com
