The shifting sands of the VCT market
Steven Ford, Marketing Manager
It’s the most wonderful time of the year. Christmas may be only a week away, but as the manager of several venture capital trusts it is also one of the most important periods of the year for all of us at Maven. This is now my fifth VCT fundraising season and the festive period represents one of my busiest times of the year. After months of planning, development, and close collaboration with the VCT Boards we finally launched the new £18 million Maven VCT Offers in late October.
Traditionally the VCT fundraising season runs from November through to April, but recently this period has started to shift somewhat. In the past few years we have seen it kick off even earlier, this year being no exception, and many of us may not have even been on our summer holidays before the first offers were being launched at the start of September. The tail end of the fundraising season has also constricted to a degree as we have seen many of the most popular VCT offers close far earlier than originally specified as a result of being fully subscribed.
The days are gone when VCTs do the bulk of their business as the 5th of April looms large. No longer are VCTs considered solely on the grounds of the initial income tax relief saved, but now more importantly on the steady tax-free dividend income which is produced generating healthy yields of 5% and more. As more investors look to tap into this regular income stream, demand has arguably outstripped supply for the most popular VCT offers and we are seeing inflows of investment far earlier in the season. In fact the Maven Offers are well over a third full already.
No sooner does one VCT fundraising season finish before we are planning for the next. The starting point for Maven is to always re-evaluate the previous offers to see what can be improved. We are lucky to be provided with a wealth of information and as a marketeer it is part of my job to evaluate this data and understand the needs and wants of our shareholders.
Listening to this valuable market sentiment has seen our offerings evolve significantly over time and I believe to the benefit of our investors. In cooperation with the Boards we have tackled the issue of discount management and introduced set share buy-back policies within five of our managed VCTs. We have improved our investor communications and initiated a shareholder loyalty discount on the current VCT top-up offers. Most notably for this season we have also introduced self-selection allowing investors, for the first time, to be able to choose which Maven VCTs they invest in.
However the hot topic on many investors’ lips during the current fundraising season has been the cash piles some VCTs are sitting on. In a way VCTs have become victims of their own success as managers have gone for bigger fundraisings and these larger offers have become fully subscribed due to increased demand. At Maven our aim is to create value for all our shareholders and therefore diligently match fundraising totals with our investment needs. This ensures that not only is there sufficient capital available for new later-stage investment opportunities and that we can continue with our progressive dividend policy, but that it also matches our forecasted deal-flow for the forthcoming year to limit large amounts of investors’ cash sitting idle.
It is an exciting time of the year for a VCT manager and the shifting sands of the market certainly keep us all on our toes. Yet, not matter how important the VCT fundraising season is for Maven it unsurprisingly plays second fiddle to that other major event in December and so on the 25th, for one day at least, my thoughts will be elsewhere.