Investors plugged a record £1.13bn into venture capital trusts in the 2021/22 tax year, a 63 per cent increase compared with the previous tax year.
Data from the Association of Investment Companies released yesterday (April 7), showed that investment into the vehicles soared above the previous record, £779mn in 2005/6.
Richard Stone, chief executive of the AIC said the record level of VCT fundraising is excellent news for the UK’s small and fast-growing businesses.
“VCTs provide much-needed support to the businesses they back and last year invested just under £670mn in small private companies and AIM companies.
“These companies deliver important economic and social benefits to the UK which range from exports and increased tax take to cutting edge technology and job creation in sectors as diverse as healthcare, online retailing and green technology."
Alex Davies, chief executive of Wealth Club added that VCTs have been a “shining light” during an incredibly changing time.
“Packed with some of the fastest growing and most exciting early stage UK businesses they have become a viable alternative to pensions for the many wealthier investors now effectively frozen out of pensions thanks to restrictions brought in by successive governments during the last 12 years.”
Jason Hollands, managing director at Bestinvest, said the high levels of VCT fundraising will continue, as the tax burden on wealthier individuals is set to rise as the freeze on personal allowances until 2026 bites.
He added that the surge in fund raising has been driven to a considerable degree by the hunger for follow-on financing from existing companies within VCTs portfolios as they have come out of the Covid hit to the economy and so the funds raised over the last year will not all be destined for new opportunities.
“Unlike more mature businesses, fast-growing companies can have a voracious appetite for cash on their journey to reach profitability and as the VCT rules are now squarely focused on providing growth capital – with previous popular deal types such as management buy-outs and asset backed deals no longer permissible – we can expect VCTs to come back for more fund raising on a regular basis, to support such businesses.”