NVM Private Equity has transferred its range of Northern Venture Capital Trusts (VCTs) to a fund management firm with no previous record of managing VCTs.
The three trusts, which according to data from the Association of Investment Companies have combined assets under management of £267.4m, will now be run by Mercia Asset Management.
Mercia has no record of managing VCTs, but does manage Enterprise Investment Scheme (EIS) funds and institutional venture capital mandates.
Tim Levett and Charles Winward, who oversaw the management of the trusts at NVM, will continue to oversee the trusts at Mercia.
Jason Hollands, managing director at wealth manager Tilney, said: “The Northern VCT range are among the longest established in the UK.
"[NVM] made their name as a manager that specialised in management buy out type deals, and under the new VCT rules these are no longer permitted.
"Mercia have experience of investing in the sort of earlier stage companies that are permitted under the new rules, so it makes sense strategically.
"The deals made under the old rules that are still in the fund, many of those are companies in which NVM is also invested via its other products, so investors get access to NVM's involvement in the historic deals and Mercia’s involvement in the new investments that have to be made under the new rules.”
The rules governing the types of companies in which VCTs can invest changed as part of HM Treasury’s Patient Capital Review in 2017, with management buyouts no longer permitted.
The aim of the review was to ensure that the tax breaks granted to investors were going to investments that are genuinely risky, therefore activities such as management buyouts and renewable energy, which were deemed to be low risk, were excluded.
Renewable energy was considered low risk because the investments received government subsidies, so the revenues were government backed.
Alex Davies, who runs VCT advisory firm Wealth Club, told FTAdviser the VCT market has seen increased demand from investors since the pension lifetime allowance was reduced again in 2015, to just over £1m.
He said many savers have used up the pension allowance and wish to access the tax breaks offered by VCTs as an alternative.
Individuals who invest in newly issued VCT shares receive a 30 per cent income tax discount if they hold the shares for at least five years.
david.thorpe@ft.com
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