Three VCTs to consider and why you must act soon if you wish to invest

You may be interested in Venture Capital Trusts (VCTs) if you have fully utilised your ISA and pension allowances, are willing to take on a higher degree of risk and have a medium to long-term time horizon.

FacebooktwitterlinkedinmailFacebooktwitterlinkedinmail   by Sophie Kennedy, 17th February 2017

VCTs are tax efficient investment vehicles made available by the UK Government to promote funding for small and medium-sized companies. VCTs offer a range of attractive tax incentives, including 30% income tax relief and tax-free dividends.

Popular VCTs often sell out quickly and after pension investment restrictions came into force this year, providers are seeing unprecedented demand.

Below are three VCT offers we believe have merit, though please remember VCTs are higher-risk and this is not a personal recommendation to invest.

Albion VCT

The Albion suite of six VCTs follow a more conservative investment strategy compared to the Generalist VCT sector, given the allocation to asset-backed opportunities and use of loan notes. While you can invest in an individual VCT, taking an equal allocation to those VCTs within their suite that are still fundraising would provide further diversification benefits and result in a broad and balanced portfolio.

Hargreave Hale AIM VCT 1 & 2

These VCTs, as the name suggests, will predominantly invest in companies listed on the Alternative Investment Market (AIM), the junior stock market in the UK. However, within the mandate both have the scope to invest in companies likely to list on the AIM market as well as private companies, offering them a broad investment universe.

Octopus Titan

The investment strategy employed by Titan VCT has arguably the biggest focus on the earliest stage of the venture capital market, investing in truly small UK private companies with high growth prospects. An obvious implication of this is that, in our opinion, this places the VCT at the riskiest end of the VCT universe. However, we believe the impact of the diversification, with approximately 50 investee companies, somewhat mitigates the risk of investing in these high growth prospects.

How to invest

EQ conducts a detailed review of each VCT, which includes meeting with the management team, analysing their track record and understanding their investment strategy. You can view these here.

In most cases we can discount the standard charges, saving you money and enhancing your future returns. However, you should only invest based on the underlying invest merits and not solely the generous tax reliefs.

Sophie Muller
Head of Research, EQ Investors

» If you have any questions about the above, please do not hesitate to contact us.


About the author: Sophie Kennedy

Sophie is responsible for the research agenda across EQ, leading a six-strong team that covers open and closed-ended funds, as well as tax-efficient investments including VCTs and EIS’. Sophie is a CFA charter holder.

Outside work, Sophie is a keen footballer, captaining Leyton Orient Ladies in the London & South East Womens Premier League. When not playing, Sophie is pitch side at the Emirates Stadium, watching her beloved Arsenal. Off season, her other passions include travelling, cricket and running, with two London Marathons under her belt.

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