InvestmentsApr 9 2014

VCTs hit 8-year high with £375m in 2013/14

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ByTony Levene

Bestinvest’s managing director of business development and communications said the figures confirmed earlier optimism that 2013/14 could be a “sweet spot” for the VCT market.

He said: “The UK domestic recovery creates strong pipelines of new investment opportunities.

“VCTs focus on small businesses operating wholly or largely in the UK, at the coal face of the domestic recovery, unlike investing in listed UK equity markets where companies are more international.”

He said the ongoing reluctance of banks to lend has also fuelled demand for VCT fund raising, much of which comes through loan notes.

He added that many VCTs are continuing to raise funds into the new tax year with an estimated £115m capacity remaining.

The Association of Investment Companies published key facts on the sector showing the average VCT investment is held for around six years, though some companies remain in the portfolio for 10 years or more.

Adviser view

Pete Ingham, chartered financial planner at Lancashire-based Prosper Independent Financial Advisers, said: “VCTs are a tax-efficient tool for diversifying a large portfolio for an experienced investor with the capacity for loss, prepared to take the risk.

“With the reduction of the pensions annual and lifetime allowance, there may be some very high net-worth clients who may want to look at these investments in conjunction with other tax and investment planning.”