Half VCTs’ assets yet to be invested

Almost half of the assets of venture capital trusts (VCTs) are held in non-qualifying investments or cash, research finds.

VCTs have some £2.48 billion in net assets under management, of which £1.10 billion is not yet invested in companies that qualify for VCT investment under tax office rules, according to research from Business XL, the sister title of GrowthBusiness.

Last year VCTs, which must hold at least 70 per cent of their assets in qualifying investments, collectively raised some £340 million. Current cash holdings across the industry are about £540 million.

Tim Levett, executive chairman at NVM Private Equity, which runs four VCTs with net assets of some £140 million, says that market conditions last year made it difficult to find investment opportunities.

He explains, ‘2009 was a very barren year. That was a combination of us being concerned about the earnings forecasts we were seeing and the disinclination of entrepreneurs to sell their businesses.’

However, Levett adds the market is returning to normality. ‘Towards the end of 2009 we did three deals and now we have several more in the pipeline.’

According to many fund managers, investing has also been hampered by more restrictive VCT rules, in place since 2007, which set a limit of 50 employees for companies to qualify for investment.

Patrick Reeve, managing partner at Albion Ventures, which runs seven VCTs, calls this restriction ‘absolutely insane’.

He comments, ‘Not only do [the rules] knock out most AIM[-quoted companies], but when you back a company and it grows through success to having more than 50 full-time employees, you can’t support it beyond that level.’

More than one-third of the money VCTs have available for investment, some £426 million, must be deployed under the new rules, Business XL finds.

Business XL’s VCT Report 2010 contains details of the cash available inside each and every VCT, along with performance information, contact details and insights from leading fund managers.

Nick Britton

Lexus Ernser

Nick was the Managing Editor for growthbusiness.co.uk when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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Venture capital funding