Octopus Investments is planning to raise further funds for its flagship venture capital trust Octopus Titan VCT.
The fund manager announced today (September 17) it would be issuing £120m worth of new shares, meaning the fund could reach a size of nearly £1bn assets under management if fully subscribed.
VCTs are like investment trusts but only invest in small, young and usually unlisted companies. Although such companies are riskier and statistically more likely to go bust, investing in a VCT comes with a 30 per cent income tax relief from the government and any returns are tax free.
The trusts have performed well in recent years and research from Wealth Club shows the top 16 VCTs have all at least doubled investors’ money on a net asset value return basis over the last 10 years.
VCTs have also become increasingly mainstream with 2018 having the second biggest VCT season on record with £731m raised, according to Wealth Club.
According to Octopus, the Octopus Titan VCT offers investors access to a “well-established and diverse” portfolio of more than 70 “potentially game-changing” smaller companies.
In the last year, the trust has invested £43m in 15 new companies. One such example was Cazoo, a new business founded by Alex Chesterman, who also founded Zoopla Property Group which itself was the first VCT-backed business to reach a £1bn valuation.
Paul Latham, managing director at Octopus Investments, said: “VCTs have become a vital part of the UK’s entrepreneurial ecosystem and provide funding for hundreds of innovative businesses across the country.
“Just looking at Octopus Titan, the positive impact of VCT investment is huge, driving significant revenue growth and creating thousands of new jobs. Investors are increasingly aware of this and many like the idea of backing smaller companies and contributing to their success.”
Jo Oliver, fund manager of the Octopus Titan VCT, said: “Our track record means successful serial entrepreneurs come back to us when they launch their new venture, with the Zoopla and LoveFilm founder Alex Chesterman and his new business Cazoo being a perfect example.”
Alex Davies, chief executive and founder of Wealth Club, said Octopus’ latest fundraise gave investors the opportunity to support some of the UK’s fastest-growing companies while benefiting from upfront tax relief, tax-free dividends and tax-free growth.
He said: “To date, the VCT has performed well – you would have doubled your money in ten years - and with more than 75 companies, the portfolio is diverse which should mitigate some of the risks of investing in a naturally risky area.
“For wealthier investors, VCTs are one of the few sensible tax efficient investments left.”
Tom Sparke, investment manager at GDIM, agreed. He said Octopus had a long history of successful tax-advantaged products and this new issue should “continue that journey”.
He added: “The opportunity from these early-stage companies is enormous and their experts pick out the most innovative companies, many of which have gone on to become very successful in the past.