Generalist VCTs have proved popular so far this VCT season, and in my view this top up offer from NVM is likely to attract plenty of interest. It incorporates two established, generalist VCTs, Northern Venture Trust and Northern 2 VCT. Both offer a good mix of sectors and companies ranging from management buyouts to earlier-stage development capital investments. In the offer it is possible to select one of these VCTs or both. Investors stand to gain access to the existing, mature portfolios as well as new investments to be funded from the monies raised.
These are large funds in the context of VCTs and each has around 40 existing investments, although there is considerable overlap with around 90% of holdings common to both. Both VCTs should readily produce dividends given their broad spread of investments and the extensive use of income paying loan stock.
VCTs are higher risk long-term investments that are not suitable for mainstream investors, or those who need access to their money in the short term; as such we believe that they are only suitable for sophisticated investors. The FSA suggest advisers only recommend them to investors with an annual income of more than £100,000 or investable assets of more than £250,000. However, as we offer an execution only service, we allow clients to make their own decision if they accept full responsibility for the suitability of the investment; if you have any doubts please contact us for advice.
Among the exciting established holdings in the portfolio are Alaric, which develops software for electronic payment protection, Kitwave, a confectionary and beverage wholesaler expanding through acquisitions, and Tinglobal, a company that refurbishes and sells second-hand IT equipment. There has also been a number of new investments made during 2012 including Volumatic, a manufacturer of cash counting machines; Silverwing, a specialist in storage tank and pipe inspection; Haystack Dryers, a manufacturer of purpose built body dryers; and Intuitive, a travel software business.
The NVM team remains among the best resourced and experienced in the business, and for those seeking generalist VCTs with a good mix of sectors and companies I believe this offer is worth considering. Early dividends should be a feature of both VCTs and given the small size of the offer at just £8m I believe it is likely to sell out early. The risks of this VCT are described in more detail in the prospectus. For more information on VCTs, the risks, and the tax reliefs available, please refer to the VCT section of our website.
Remember, VCTs are sophisticated investments and only for experienced investors who understand them. They invest in smaller, usually unquoted companies, some of which could struggle and even fail altogether, so you could get back less than you invest. They also have higher charges than most types of funds and usually include performance fees. There might only be one market maker for VCT shares which means they can be harder to sell than main-stream equities, and they are exposed to substantially higher risks. Please remember tax rules can change, the benefits will depend on your circumstances and that to retain the 30% income tax relief investors must hold the shares for at least five years and the VCT must retain qualifying status.
If you're interested in this VCT offer please refer to the VCT section of our website for further details and the prospectus, which should be read before investing. If you proceed with an application we'll assume that you regard yourself as a suitably sophisticated investor. If you have any doubts you should seek expert advice.