Supply of open venture capital trusts to meet rising demand has been narrowed further today (27 February), as Mobeus Equity Partner closed VCT share offers after raising its £39m target.
The Mobeus VCT offers have proved the most popular fundraising in the current tax year, attracting 18 per cent of the £204m subscribed as at 26 February, according to data published by the independent researcher Tax Efficient Review.
Appetite has been strong this year as investors seek attractive tax-free yields in an environment of low returns for savers and limits on pension contributions for higher earners.
Mark Wignall, Mobeus’s managing partner, told FTAdviser that fundraising and subscriptions have been running at more than double last year’s volumes, but they still had to turn away many investors and their advisers.
“We had to send back a lot of cheques, so there will be disappointed advisers and clients out there, but we only have a finite capacity and some people have simply left it too late.”
He said that many other providers do have over-allotment facilities, but it would appear the more popular VCTs have filled up much earlier than previous years.
“It’s not clear what happens now, will we see much more money invested, or have most of those who wanted to get involved already invested?”
Jason Hollands, managing director for business development and communications at Tilney Bestinvest, restated that the challenge this tax year for the market is that while demand is buoyant from higher rate tax payers attracted by the high yields on offer, supply has been scarcer than last year from some of the top generalist VCT teams.
One major manager, Northern, has decided to raise no new money and Baronsmead has only raised £3.75m for one of their VCTs.
“With Mobeus now closed, we think the pace of fund raising in the generalist VCT space is going to ratchet up for British Smaller Companies VCT as the only remaining private-equity focused VCT that earns a five-star rating,” he added.
Annabel Brodie-Smith, communications director at the Association of Investment Companies, told FTAdviser that investors need to remember that small company VCTs can only get so big.
“Raising too much money just puts too much pressure on the team, you need to be fairly flexible in order to manage the funds properly.
“There is still availability in the market and clearly there is still demand, but investors need to be quick off the mark,” she added.
peter.walker@ft.com
