The changes to the Venture Capital Trust rules announced in last year’s budget may be hindering competition in the market, according to analysts.
The rule changes restrict the types of companies that VCTs can invest in, in an attempt by the government to drive capital away from "capital preservation" investments and towards riskier investments.
For instance VCTs are no longer permitted to invest in management buyouts and certain other sectors, such as some media investments.
But firms are allowed to retain their investments made in previous years that would no longer qualify under the new rules, which makes it harder for new players to compete with them, according to some.
Jason Hollands, managing director at Bestinvest, said: "Because existing large players can retain the investments in mature businesses from years ago, even if they have to put capital raised this year to early stage companies that are riskier, they have the mature portfolios alongside them that are probably less risky, making for a generally less risky portfolio.
"That makes it harder for new players, who have to create entirely new portfolios."
Alex Davies, founder of Wealth Club, said the new rules have exacerbated an existing condition in the market, whereby investors have typically preferred to invest in the existing VCTs as they have more certainty about what they are investing in.
The comments came in the context of Octopus Ventures seeking to raise £250m for what would be the largest Venture Capital Trust fundraising in history.
The company launched its VCT offer with the aim to raise £120m and an 'over allotment' facility of £80m, meaning it was happy to release £80m more of shares for investors to buy if the first lot of shares sold.
This initial £200m has been raised, and the company now intends to raise another £50m.
Mr Davies said: "Octopus have always invested in a way that is compatible with the new rules, so haven’t had to change their investment style. Investors can see what has always been invested in."
But figures out earlier this month suggested fundraising across the market had slowed.
According to data compiled by Tilney investors have placed £466m into Venture Capital Trusts so far this tax year towards a target of £819m and of this £129.7m was raised by the Octopus Titan VCT.