An essential part of the UK economy, Venture Capital Trusts (VCTs) have been supporting domestic businesses for more than 25 years. The emergence of the Covid-19 pandemic has left question marks over the extent to which VCTs will continue to help young British businesses and how effective venture capital investment has been over the past two years.
Last week, the Association of Investment Companies (AIC) held a media webinar to discuss how VCTs’ underlying investments in UK businesses are faring during this third wave of the Covid-19 pandemic, and what 2022 might hold for new investment activity and exists. To comment on these matters, AIC welcomed Malcolm Ferguson, Partner at Octopus Ventures who helps manage the Octopus Titan VCT; Chris Hutchinson, Manager of Unicorn AIM VCT; and Bevan Duncan, Managing Director of Strategic Equity for Gresham House, which manages the Mobeus Income & Growth VCTs.
Malcolm Ferguson – Octopus Ventures
Since its formation in 2007 Octopus Ventures has backed world changing entrepreneurs who are pioneering, innovating and improving products and services to create better outcomes for society. Although the Covid-19 crisis has presented many issues to UK VCTs, Ferguson highlighted the success of the trust, which created over 880 jobs across its Titan VCT portfolio in 2020 alone.
Ferguson was also keen to focus on Octopus Ventures’ outlook for 2022. However, international growth, investor reliance and macroeconomic pressures may be a cause for concern in this year, as the UK is still getting to grips with the Coivd-19 crisis and its effect on the domestic economy.
Chris Hutchinson – Unicorn AIM VCT
Unicorn AIM VCT was launched in 2001 to allow investors the opportunity to benefit from generous tax reliefs while investing in growth companies listed mainly on the AIM market. The trust’s current portfolio has a net asset value of over £300 million, with a large number of well-established businesses and a strong history of steady dividend distributions. In FY20/21, Unicorn AIM VCT’s NAV per share increased by 42.8%, whilst its share price rose by an impressive 53.7%, as the AIM performed extremely well.
Looking at 2022, Unicorn’s approach to managing the VCT remains long-term and risk averse, including a large number of investments diversified by sector. Hutchinson claimed portfolio companies will continue to be financially and operationally robust, as liquidity appears to be strong and distributable reserves remain at a healthy level.
Bevan Duncan – Gresham House
Gresham House is a specialist alternative asset manager offering a broad range of funds, direct investment and tailored investment opportunities across five alternative investment strategies. The VCT’s current focus areas include B2B software, specialist e-commerce, marketplace models, specialist services companies in the pharmaceutical outsourcing market and digital healthcare. Baronsmead Venture Trust is a division within Gresham House that has seen average annual revenues of £36.5 million and £9.3 million in its core and growth portfolios, respectively.
On the back of its strong performance in 2021, Baronsmead predicts it will continue to manage the Covid-19 crisis successfully in the upcoming years. Duncan claimed the VCT will see increasingly strong flows of both new and follow-on investment opportunities and believes it will continue to generate capital profits to support the regular and consistent payment of shareholder dividends – capital proceeds of £75 million realised over the past two years.
