A fundamental shift in the attitude of younger people in the UK towards entrepreneurship means the Venture Capital Trust (VCT) market can keep growing, according to Will Fraser Allen, deputy managing partner at Albion.
Mr Fraser Allen said while the rules governing the types of companies that VCTs can invest in have been tightened in recent years, this had not led to a decline in the number of investment opportunities and VCT funds such as his own have been raising new cash for investments.
He said: "There has been a big cultural shift in recent years, young people don't just aspire to work in a bank or an accountancy firm, they are attracted to tech companies and to startups. And those are the sort of companies that VCTs can invest in."
His comments come in the context of the Albion VCT range launching a £36m fundraising, £6m per VCT it manages, with the capital being deployed in a combination of new and existing investments.
He said: "There is no fixed percentage that will be deployed into existing investments, it will depend on each company.
"Not all of the companies we are invested in are early stage and need more capital. About a quarter of the companies we are invested in have 100 or more employees."
He said the average holding period for an investment was seven or eight years.
Meanwhile Ingenious, another VCT provider, one that specialises in media investments, is seeking to raise £10m from investors this tax year with a new VCT offering, Ingenious Vision VCT.
The focus of the vehicle is to provide early-stage funding to unquoted companies with high growth potential that develop, produce or exploit television and other forms of audio-visual content.
Ingenious VCT takes the view that the UK is a world leader in those areas.
Paul Stocks, financial services director at the firm of Dobson and Hodge in Doncaster said he has no clients invested in VCTs, but he is personally invested in such funds.
But he said the funds were not necessarily too risky for many of his clients, as often stated by other advisers.
Mr Stocks said: "It’s more the client’s perception of the risk being aligned to reality, the complicated nature of their structure, risk of illiquidity and also that they are a bit of a leap of faith.
"Whilst the tax breaks are good, I’d only discuss them with clients who are comfortable with the entrepreneurial nature such funds expose investors to and who can afford to lose the funds in question.
"Whilst there are different types of VCT I suggest they should be looked at as being ‘one step past 'dragons' den'."
He added: "Having said that, I enjoy holding mine and reading about the acquisitions and disposals etc."
david.thorpe@ft.com
