In conversation: Peter Dines
Peter Dines, Managing Director of Mercia Asset Management PLC subsidiary Mercia Ventures, speaks to Thomas Warner from Proactive about the company’s latest fundraising initiative. Mercia Ventures is seeking to raise £42 million across three Venture Capital Trusts.
Mercia’s Northern VCT Funds, launched in 1995, are a tax efficient fund with a target annual tax-free dividend of between 4.5% and 5%.
“Using an industry standard procedure and well-justified assumptions, we have shown that venture capital is a compelling addition to investor portfolios. Even at a relatively small proportion of portfolios, it can make a significant difference. The addition of tax reliefs make it even more compelling.”
Investing into VCTs provides investors with exposure to high-growth private companies, which can increase the overall risk and return profile of the investment portfolio as evidenced by Dr Brian Moretta of Hardman & Co.
Tax relief to encourage the support of higher-risk SMEs
UK taxpayers who invest in VCT can claim income tax relief of 30% of the amount invested and receive ongoing tax-free dividends. The government provide these tax reliefs to encourage people to support higher risk smaller businesses, which are important to expanding the UK economy.
A VCT does not replace a pension, but the tax reliefs and tax-free dividends can be complimentary to an investors long term investment plans. Whilst these do carry a degree of risk, as is the nature of all early-stage investment, they do also offer high rewards for those seeking a high-risk, high-reward profile. Despite the tax-free dividends and comparatively low minimum investment, VCTs are not for everyone, as they carry a degree of risk as the companies in which they invest are early-stage businesses.
Stimulating a wider economy
Through our Northern VCT funds, Mercia can provide an investment opportunity with exposure to innovative, small companies. Led by highly ambitious management teams, this VCT portfolio has the potential to generate significant value for our VCT shareholders. These portfolio companies are also helping to stimulate the wider UK economy along the way, which satisfies investors seeking responsible investment strategies
What do the funds invest in?
Mercia’s Northern VCT funds invest across a range of innovative sectors from Life Science through to Software and Consumer, providing investors access to unique opportunities, Whilst investment into SMEs does carry a degree of risk, as is the nature of all early stage investment, it also offers high rewards for those seeking a high-risk, high-reward profile.
How much do I need to invest?
You can invest up to £200,000 into VCT funds in any tax year. The Northern VCT Funds which Mercia manages has a minimum £6,000 investment level.
What are the risks?
VCTs are not for everyone. They carry a degree of risk as the companies in which they invest are early stage, which can mean less well-established businesses. It is important that you carefully research the opportunities and seek professional advice from a properly regulated entity or professional.
Mercia’s investment team has an established track record delivering returns for shareholders across both private and public sector mandates. Over the years the VCT team has started to build an enviable track record making it one of the most promising VCT teams in the country.
“The average uplift ratio is 2.29x (Exit Multiple / Unrealised Multiple); where a ratio of above 1.00 means the VCT’s exit performance has been stronger than its unrealised performance. This is the highest uplift ratio achieved of all of the VCTs reviewed this year.”