Venture capital trust managers are brushing aside concerns over capacity this year and predicting a strong year for the sector in terms of investments and returns, citing economic fundamentals which they claim support backing of growth companies.
VCTs had a good year in 2014: in terms of share price performance the VCT Generalist sector was up 10 per cent over one year, outperforming the wider investment trusts average by 2 percentage points.
According to David Hughes, chief investment officer of Foresight, managers of the Foresight VCTs, outperformance stems from “strong profits and sales growth”.
He said: “The relatively benign economic conditions and the stable low interest rate environment have been a helpful backdrop for high growth companies to deliver exceptional performance.
“When combined with high stock market ratings, this has led to particularly attractive offers from potential acquirers.”
Bill Nixon, managing partner of Maven Capital Partners, manager of the Maven VCTs, agreed that deal flow remains at healthy levels and he expects larger private equity houses will continue to be an important source of exits for VCT managers.
Concerns have been raised in recent months that demand may be such that it could outstrip supply during fundraising season, with some investors missing out. The potential problem has been exacerbated by a couple of high-profile managers deciding not to raise funds this year.
Mr Hughes said: “We see attractive prospects for VCT fundraising in 2015, with healthy appetite from investors seeking good yields.”
He added that the recent changes in the caps to pension contributions mean that VCTs are an “increasingly mainstream option” for generating income through a tax efficient shelter.
Mr Hughes added: “When it comes to exits, we are seeing high levels of demand for fast-growing, well-managed companies in attractive markets. We see no reason for this to change currently unless there are major macro-economic upheavals.”