According to many press reports it has been a tough time for venture capital and private equity investments. The effects of the credit crunch have taken their toll with banks reining in their lending and consumer demand weakening. Is it all really that bad? In some cases, yes it is. However, for others, whilst the last 18 months has been tough, many investments have proved resilient and some have even prospered.
One venture capital house that has fared relatively well is Matrix Private Equity Partners, managers of five VCTs. Headed up by Mark Wignall, Matrix remain one of my favoured VCT managers, possessing strength in depth and a sensible approach to choosing investments. The team generally make later stage management buyout deals, avoiding higher risk start-ups and AiM listed companies. A good example is Pasta King, a business turning over in excess of £12 million annually supplying pasta (as you might have guessed) to schools and universities. Matrix sold their stake last week after more than tripling their original £1.8 million investment over a three year period. The investment was spread across various Matrix VCTs.
Elsewhere in the portfolios it is clear Matrix have made some tough but fair decisions. They have written down the value of some of their holdings, in some cases quite substantially, as profits have fallen. This has naturally affected the quoted net asset value for their various VCTs. However, having big successes such as Pasta King in several funds has helped make up for the write downs and, overall, the funds' Net Asset Values have been stable. Furthermore, Mark Wignall is confident that the write downs were only temporary and that the underlying businesses are sound. He believes we are past the low point in terms of valuations and that over time profits will recover, which should lead to an increase in the net asset values of the Matrix VCTs.
Amidst falling valuations and an uncertain economic environment many venture capitalists have been keeping their powder dry, taking the view that preserving cash was a more sensible course of action. Matrix have made just one new investment over the last 18 months, but Mr Wignall doesn’t expect this situation to continue much longer. Going into 2010 he expects to complete many more deals as the economic outlook clears and companies resume plans to expand. With a relatively large cash position across the VCT range, it is unlikely Matrix will undertake any significant fundraising this tax year. However, they may well do a small top-up to one of their existing VCTs. If they do, it could be an interesting opportunity if Mr Wignall proves correct that profitability is returning and valuations have bottomed. If Matrix do launch a small offer for one of their VCTs, details will be available on the VCT section of our website.
One venture capital house that has fared relatively well is Matrix Private Equity Partners, managers of five VCTs. Headed up by Mark Wignall, Matrix remain one of my favoured VCT managers, possessing strength in depth and a sensible approach to choosing investments. The team generally make later stage management buyout deals, avoiding higher risk start-ups and AiM listed companies. A good example is Pasta King, a business turning over in excess of £12 million annually supplying pasta (as you might have guessed) to schools and universities. Matrix sold their stake last week after more than tripling their original £1.8 million investment over a three year period. The investment was spread across various Matrix VCTs.
Elsewhere in the portfolios it is clear Matrix have made some tough but fair decisions. They have written down the value of some of their holdings, in some cases quite substantially, as profits have fallen. This has naturally affected the quoted net asset value for their various VCTs. However, having big successes such as Pasta King in several funds has helped make up for the write downs and, overall, the funds' Net Asset Values have been stable. Furthermore, Mark Wignall is confident that the write downs were only temporary and that the underlying businesses are sound. He believes we are past the low point in terms of valuations and that over time profits will recover, which should lead to an increase in the net asset values of the Matrix VCTs.
Amidst falling valuations and an uncertain economic environment many venture capitalists have been keeping their powder dry, taking the view that preserving cash was a more sensible course of action. Matrix have made just one new investment over the last 18 months, but Mr Wignall doesn’t expect this situation to continue much longer. Going into 2010 he expects to complete many more deals as the economic outlook clears and companies resume plans to expand. With a relatively large cash position across the VCT range, it is unlikely Matrix will undertake any significant fundraising this tax year. However, they may well do a small top-up to one of their existing VCTs. If they do, it could be an interesting opportunity if Mr Wignall proves correct that profitability is returning and valuations have bottomed. If Matrix do launch a small offer for one of their VCTs, details will be available on the VCT section of our website.
