A VCT is an investment company whose shares are listed on the London Stock Exchange. Maven is the Investment Manager for each of the Maven VCTs, and in providing the information on this website is acting solely for the Companies and for no-one else.
The principal activity of VCTs is investing in smaller companies that are seeking capital, where those underlying investments must be predominantly in businesses which meet specific qualifying conditions, in order that investors can retain the associated investor tax benefits.
Investment in new VCT shares offers significant tax benefits for UK investors, as well as the potential for attractive returns from investment in high growth smaller companies. However, VCTs are principally aimed at investors who understand the nature of smaller company investment, and who can afford to take a longer term view and accept that the value of their investment can go down as well as up, as there is also more risk attached to owning such shares than there is with larger companies.
Maven investment approach
The Maven VCTs invest predominantly in VCT qualifying private companies. Private Equity is increasingly recognised as one of the main classes of alternative asset within a diversified investment portfolio. It is largely uncorrelated to prevailing main market volatility, and offers investors the opportunity to generate greater long-term returns than are available through many other asset classes. For investors and advisers considering investing, whether primarily for the potential returns or its merits as part of a portfolio allocation, investing in generalist VCTs can be an attractive option. Although investment in private businesses carries a higher risk than investment in listed companies, it also offers the clear potential for higher returns.
Maven’s core objective in private company investment is to create value for investors, investing across a broad range of industries, in companies that are available at attractive entry prices, have strong core charactertistics such as offering a sector-disruptive business model, and which offer significant growth potential over a period of three to five years.
These are ambitious businesses led by talented people, who can demonstrate a blend of vision and business flair, alongside a differentiated and competitive proposition. The management team of a private equity-backed business will also typically be highly incentivised through the transaction structure in order to achieve healthy returns for its investors.
Benefits and Risks
Whether purchased through new issues or on the open (secondary) market via a broker, VCT shares offer significant advantage for tax-paying investors:
- Income Tax relief of up to 30% on subscription (only for new shares)*
- Dividends free of Income Tax, whether shares are bought new or on the secondary market
- Profits made on the disposal of VCT shares are free from Capital Gains Tax, whether shares are bought new or on the secondary market
- There is no minimum holding period for purchases of shares on the secondary market
*Available on a maximum investment level of £200,000 in the tax year, and restricted to the amount which reduces the income tax liability to zero for the year of subscription. In order for the initial tax relief to be retained, the shareholder must hold the new shares for at least five years after investment.
Well managed VCTs offer the potential for significant and rising levels of income, through the payment of regular dividends to shareholders and long term growth in shareholder total return resulting from the profitable realisation of assets.
VCTs can provide tax-efficient access to well-researched private company assets, as part of a broadly-based investment portfolio. Established VCTs will typically invest in between 25 and 40 private companies, to create large and highly diversified portfolios.
With over 250 years’ collective experience of investing in UK private companies, the Maven team has a proven approach to managing the risk associated with VCT qualifying private company investment, while maximising the potential for tax-free income and capital gains. Key strategies include:
- a rigorous investment selection process, investing only at attractive entry prices in businesses offering significant growth potential over a period of three to five years
- a policy of investing only into businesses run by proven entrepreneurs and management team, with a record of success of building and growing previous businesses in the sector
- each private company investment being structured to maximise the potential for income and capital gains, whilst incentivising the management team to deliver consistent growth
- maintaining active involvement and support with investee companies post-investment.
Risk is further mitigated by diversifying each Maven portfolio across a wide range of industry and geographic sectors, with typically no more than 4% of the VCT's assets (at time of investment) committed to any one holding.
VCT shares should be seen as a long-term investment. A VCT’s underlying investments will normally be in unlisted companies whose securities are not publicly traded and are therefore likely to be illiquid and carry substantially higher risk than investments in larger, listed companies. The value of VCT shares, and the level of income derived from them, may fall as well as rise and investors may not get back the money originally invested. Existing tax levels and reliefs may change and the value of reliefs depends on personal circumstances. For further risk information click here.
VCT shares can be traded just like any other shares listed on the London Stock Exchange. Maven cannot advise on the sale or purchase of VCT shares. If you are interested in buying or selling shares you should contact your broker/adviser and request that they contact Shore Capital Stockbrokers Limited (Tel: 020 7647 8132), the principal market maker.
Existing VCT shares (i.e. those purchased in the 'secondary market') can offer an attractive and tax-efficient investment opportunity for a higher rate tax-payer or any income-seeking investor.
Whilst investment in existing VCT shares does not offer the initial tax relief that is available on investment in new issues, those shares nevertheless attract significant tax benefits:
- Dividends are tax-free
- No capital gains tax is payable on the sale of shares
- There is no tax-related five year minimum holding period.
Some shareholders have received unsolicited calls from organisations offering to buy their VCT shares at prices much higher than current market values, or to sell non-tradable, overpriced, high risk or even non-existent securities. Whilst the callers may sound credible, shareholders should be aware that their intentions are often fraudulent. If you receive such a call, you should exercise caution and take note of the advice available from the ACTION FRAUD website as well as consulting the Financial Conduct Authority (FCA) website (which contains valuable information on how to avoid investment and pension scams).