‘Brexit is a rubbish idea but it is where we are’

“Really, he was picking our brains as to what our concerns were and what the opportunities were,” he says. “I think there are opportunities to remove some of the layers of legislation that have been around – particularly some of the UK interpretation of EU legislation – and to have a longer term project to remove layers of EU legislation where it’s not needed.”

He clarifies: “From a venture capital trust point of view, quite a lot of the EU state aid provisions seem heavy and restrictive. If some of those could be lifted without damaging the Treasury’s policy objectives, that would be great.”

But Mr Reeve is far from positive on the wider ramifications of Brexit. Asked about his concerns, he does not hold back.

“My big picture is that now is not the time in the world’s history to show lack of solidarity with allies.

“I think Brexit is a rubbish idea but it is where we are. I think it’s absolutely barmy to weaken our ties with our allies when, actually, the world needs moral leadership and Europe should be a moral leader. It’s silly of us not to be a part of that.”

One thing we may want to look at is whether we get into quoted fund management Patrick Reeve, Albion Ventures

Mr Reeve’s day job focuses on finding future leaders of a different kind. He is the managing partner at Albion Ventures, a venture capital investor that launched its first venture capital trust (VCT) just over 20 years ago. Having raised £25m back in 1996, the business now has £450m under management.

In the early days, he says the business was trying to invest in the “predictable end” of venture capital.

“We still do that, but now we’ve spread right out into technology – we do a lot in medical technology, life sciences and IT,” he notes.

“We’ve got £300m in VCTs, we’ve got another £50m in a fund we manage jointly with University College London. It’s called the UCL Technology fund and that invests in intellectual property coming out of UCL, with particular strength in life sciences and medical, so that’s really early-stage gene therapy.

“Then we’ve got about £75m in a renewable energy business for portfolio projects and a specialist care home fund as well.”

He believes VCTs have become a more appealing product to investors since the company launched.

“I think VCTs now have a 20-year plus track record and it has been proven they provide decent long-term returns and are a good supplement to a pension,” he says.

“And because they invest in portfolios, or they are themselves a portfolio, they spread the risk very effectively.

“I think their popularity is going to continue and I also think the government recognised they do a lot of good in terms of building up the infrastructure for our small and medium-sized enterprises in the UK.”

He expects government support for VCTs to continue on the basis they provide an efficient form of tax relief.

Dividends paid by a VCT are free of income tax, while no capital gains tax applies to the gains made on disposal of shares.

“The good thing about VCTs is they are evergreen. It’s one set of tax breaks but then the money within the VCTs is used over and over again, because whenever you sell a business you reinvest in another one and the tax breaks are very upfront when you first raise the money,” he confirms. “Our oldest VCT is now 20 years old and the money in that has been turned over three times.”

Like many, Mr Reeve sees a growing role for the products – which have an annual investment limit of £200,000 per person – in view of the increasing restrictions on pensions allowances.

“As a supplement, when people have reached their limits in pensions, which is happening earlier and earlier, VCTs are not a bad place to put your money,” he suggests.

The role of VCTs in the pensions world is also helping Albion appeal more to advisers and wealth managers, a trend he hopes will continue as the business tries to broaden its customer base.

“It is interesting that, in the current fundraisings, we’re seeing a lot of new financial advisers coming in,” he notes.

“I think that’s a process that’s going to continue in the years ahead as more and more advisers will be seeing VCTs as a staple, where they put their clients’ money as part of their portfolio. I see that increasing and we’ll be increasing our offering in line with that.”

One new offering being considered by Mr Reeve that would surely appeal to the adviser community is an investment trust, although he cautions his thinking here is in its infancy.

“One thing we may want to look at is whether we get into quoted fund management. That has been on our horizon for a while and will probably continue to be on our horizon,” he notes.

“Whether it’s an investment trust or something similar – it’s investing in quoted companies as well as unquoted companies.”

He also intends to regularly “top up” Albion’s existing VCTs, having raised £36m in the last fundraising season in a bid to gradually increase the company’s footprint.

“What we try and do is to look and see where the world’s changing and then where those changes might result in value.

“Areas of technology lend themselves quite well to that, so we’ve got a lot of investments now in medical technology because things are changing the whole time in terms of how you diagnose diseases such as cancer, and also particularly with UCL in terms of how you use advances in gene therapy to change your own genetic make up,” he says.

Cybersecurity and renewable energy are additional areas of interest for Albion, but Mr Reeve admits the new breed of social media technology stocks is one area the business avoids.

He says: “I think it’s probably because we feel a bit less qualified in trying to work out where and when that will result in value.”

When asked what are the biggest challenges facing the VCT industry at the moment, he replies: “I think the biggest overall challenge is that the world is in a very low-growth phase now and a lot of countries in the west are teetering on the edges of nil growth to recession.

“I have a feeling that, in general, across the world the deflationary influences are probably driven by excess capacity and that may not go away quickly.

“I think the key thing VCT managers need to do is plug into where the world is changing and where that change is going to result in value.”

Last year the industry raised approximately £350-400m, he recalls. “What you don’t want to have is £1bn being raised, that would result in a wall of money that would, I think, struggle to find the right opportunities quickly enough.”

He concludes: “I think it’s a space where there are still a lot more opportunities than there is finance.

“And also all of the operators have their own specific areas of expertise so, although the best deals tend to be reasonably competitive, there’s certainly not too much money in the space, which is helpful.”