Venture Capital Trusts  

Age of typical VCT investor drops 11 years

Age of typical VCT investor drops 11 years
 

The age of the average VCT investor has dropped 11 years since 2017, according to new data.

Data gathered by the Venture Capital Trust Association showed the average age of the current VCT investor is 56, down from 67 in 2017.

But investors are not making the most of the tax efficient vehicles. Currently half of all investors have less than £15,000 in the products, generating below £4,500 in tax relief, the VCTA said. 

The data was collected from 2,237 investors in January this year.

VCTs offer investors tax relief of up to 30 per cent of their investment on the first £200,000 invested each year, and dividends and capital gains are also tax-free. 

David Hall, managing director of YFM Equity Partners and chairman of the VCTA, said the drop in age was a good thing as the underlying investment was long-term.

“Investing in your mid-50s allows plenty of time for those assets in which you are investing to mature,” he said.

VCTs have become increasingly popular in recent years due to the generous tax breaks, as well as the income potential they offer in a yield-starved market.

Between April 6 and early January this year £580m was invested in VCTs with more than three months of the tax year remaining. This compared with £256m in the previous tax year, according to Wealth Club.

But of the 30mn taxpayers in the UK with long-term investment needs, VCTs are still a very small part, Hall said.

“[The lack of wider traction is] likely due to a combination of [lack of] awareness, understanding and knowledge.”

These were compounded by a nervousness to invest in illiquid markets, he added.

“Advisers do play their part [in raising awareness] and whilst illiquidity is a factor in each individual underlying investment, many trusts and portfolios have in excess of 50 investments allowing this risk to be mitigated through diversification.”

Hall added VCTs were in the midst of a “Goldilocks” balance of regulation and incentives.

“If it is just right, it appeals across the spectrum of tax payers where each can invest according to ability. This makes it universal and progressive and it is a great design.

“It is a real positive if VCTs can help play a part in this whilst also providing investment to the small innovative businesses that are the engine of economic growth.”

Last month Octopus Investments launched its first VCT in 10 years, offering investors an initial £20mn in shares to back innovative companies with a sustainability focus.

The 'Future Generations' VCT will invest in early-stage firms that are disrupting industries and ‘driving positive outcomes’ for the planet and society.

It will be managed by Simon King, a partner in Octopus Ventures, and the investment team behind Octopus's £1.3bn flagship Titan VCT.