Octopus Investments has returned into the Enterprise Investment Scheme market amid growing investor demand as early stage companies are tipped as "critical" to the UK's post-Covid economic recovery.
The newly launched Ventures EIS fund will invest in smaller UK companies and early-stage tech enabled businesses with "high growth potential".
It is the first time Octopus has fundraised for an EIS fund since 2016 - at the time it was one of the biggest players in the EIS market.
Octopus described the Ventures EIS as a "high-risk, long term investment" aimed at high-net-worth investors who were comfortable taking on higher levels of risk for potentially higher returns.
The EIS fund offers a portfolio of between 10 and 15 predominantly early stage businesses and requires a minimum investment of £50,000 and an expected holding period of five to 10 years.
Paul Latham, managing director at Octopus Investments, said adviser feedback had revealed a growing investor demand in the EIS market.
He said: "UK early stage companies will play a critical role in driving the post-Covid economic recovery and Ventures EIS provides equity financing to them when it’s most needed, while also offering investors attractive growth potential and tax benefits.
"We know from speaking to financial advisers and wealth managers that there is demand for this type of investment from an established manager with high quality deal flow.
"Increasingly, high net worth investors are excited by the prospect of backing the ‘next big thing’ and are looking for ways to access the most exciting companies in a tax efficient way that recognises the risk they are taking."
Investors in the Octopus Ventures EIS fund can qualify for 30 per cent income tax relief and tax-free growth, provided the companies are held for at least three years.
Consumers investing through an adviser will pay an initial charge of 2 per cent and an annual management charge of 2 per cent + VAT a year, but Octopus will only receive the latter if a portfolio company is eventually sold for more than the amount originally invested.
Alex Davies, chief executive of Wealth Club, said the launch of the Octopus Ventures EIS was a "silver bullet" for investors.
Mr Davies said: "The launch of the new EIS from Octopus is welcome and timely – both for investors and the industry.
"Speculation around tax rises is rife, and the Octopus EIS provides a golden opportunity for investors to not only access some of the best up and coming companies at an early stage, but crucially benefit from the tax relief that EIS offer.
"Octopus is by far the most mainstream company in the rather niche world of tax-efficient investments. Its re-entry into EIS should help bring EIS further into the mainstream.
"With a big brand name and a good track record in spotting tomorrow’s winners we expect this EIS to be very popular.
"It could appeal to those already investing in EIS as well as a new audience who see Octopus’s involvement as a reason to ‘graduate’ from VCTs to EIS."
rachel.mortimer@ft.com
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