Venture capital trusts (VCTs) are giving investors inflation-busting returns, according to the latest figures from trade body the Association of Investment Companies (AIC).
Generalist VCTs are returning annual yields of 9%, while three out of four VCTs are showing returns of more than 5% – up from 59% of VCTs a year ago.
Overall VCT performance has given returns of –
- 8% over 12 months
- 24% over three years
- 53% over five years
- 89% over 10 years
Looking at the VCT market over the next 12 months, the AIC asked some leading fund managers for their views.
VCT funds hit new peak
Alex Macpherson, head of the Ventures team at Octopus and fund manager of the Octopus Titan VCTs, says now’s the time to invest in smaller companies.
“VCT funds under management are at their peak – up more than two thirds on this time last year,” he said. “I don’t think the time has ever been more exciting for investors involved in small companies.”
David Hall, managing director of YFM Equity Partners, fund manager for British Smaller Companies VCT, suggests the VCT, market will benefit from 35 to 55 year olds warming to the dividend potential of a VCT.
“Investors are looking for better returns, especially in this age group,” he said. “The dividends paid by VCTs are particularly attractive to them. Those coming up to retirement are reinvesting these dividends.
“We are picking up inquiries from wealth managers asking how VCTs can plug pension shortfalls. We’re expecting to see more VCTs to meet this demand.”
Eliot Kaye, director of Puma Investments, believes the lack of tax breaks for investors and businesses seeking equity capital is cranking up demand for VCTs.
“The market is buoyant with fewer places to shelter from tax and an unprecedented need for business funding,” he said.
Patrick Reeve, managing partner, Albion, said: “This is going to be an interesting year for VCTs. Although we can see real growth, it’s still at very low levels and in many places across the world is nil or very slow.
“Some business sectors are moving faster than others, and these include the digital economy, the generation and supply of energy, and treatments for ageing and disease.
“These will create some great opportunities for VCTs that have the resources and the expertise to help create value from this changing environment.”