For IFAs and Wealth Managers
At Mercia, we endeavour to build close relationships with all intermediaries, maintaining open and transparent communication to ensure we are adding real value, and to enhance your client relationships.
Our Investor Centre is key to our services for advisers and investors, as it provides a wide range of tools and support including a full portfolio breakdown, tax certificates, and all relevant fund documentation. In addition, advisers will be able to download full fund/portfolio reports instantly for use with their clients.
We are always available to discuss any questions that you may have, including specific cases that you are working on, to calculate net investable amounts, and to provide our most accurate deployment timeline.
Please download our fund documentation to receive an Adviser Pack for the Mercia EIS Funds.
Reasons that intermediaries consider Mercia’s EIS
There are a number of reasons why EIS is a vital tool in the financial adviser’s tool kit.
1) Your most valuable clients need EIS
Within your client base, there will be some for whom EIS may be a suitable tax efficient investment; perhaps they have had a Capital Gain, they are approaching LifeTime Allowance in their pension contributions, they require further diversification with the benefit of Inheritance Tax exemption, or perhaps they are successful entrepreneurs themselves.
EIS is just the tip of the iceberg for a client’s investment portfolio, representing the highest risk, highest reward allocation, with benefits from attractive tax reliefs.
2) EIS is now focused on capital growth
Historically, two types of EIS funds existed:
- Capital preservation EIS Funds
Where returns were modest, but in theory the risk of capital loss was low. It is notable that the number of Capital Preservation EISs have returned less than 100p in the £1 invested, and many of these strategies are not exiting in a “timely” fashion.
- Capital growth EIS Funds
Where the fund manager or investor sought capital gain over the long-term. Investing in a portfolio of high-growth companies, expecting losses and high multiple returns. Both types of EIS investment benefitted from generous tax benefits, including income tax reliefs on their investment in the short-term, tax-free capital gains and IHT relief in the medium to long term. The portfolios of Capital Growth EISs also benefit from Loss Relief being available on a company by company basis, should any of these investments fail. The government identified that Capital Preservation EISs were potentially abusing the system, not acting within the spirit of the legislation, and decided to disqualify these schemes. Therefore, investors are looking to their advisers to provide informed advice on switching to EIS funds that target capital growth.
Within any capital growth EIS fund, normally focused on technology companies, you need significant winners to offset the companies that fail. An example of this is Oxford Genetics. Oxford Genetics is a company that has received investment from five Mercia EIS funds, and which has become a leader in innovative synthetic biology-based technologies for biologics discovery, development and delivery. Oxford Genetics has also benefited from Mercia’s novel funding model as, in addition to the EIS funding, it has received considerable investment from Mercia Asset Management PLC and co-investment from Invesco Asset Management and most recently Canaccord Genuity Limited.
3) Simplified advice process
EIS is small part of a financial adviser’s remit, so delivering a simplified process is crucial. Mercia is a multi-award winning EIS fund (Growth Investor Awards 2017, EISA 2018), and is one of the most active Venture Capital funds in the UK (Beauhurst 2018). Mercia has the ability to rapidly build well-diversified funds of early-stage technology companies. With a broad portfolio, we aim to capture at least one company that will return ten times the original investment in the company, aiming to triple invested capital in five to seven years, including the income tax relief and loss relief.
As EIS has matured, Mercia has become one of the more established providers, with a strong investment track record. Against this background, IFAs should use the platforms and independent reviews (Allenbridge, Churchill and MICAP) to compare these offerings, so that they can have confidence in guiding their clients.
To read our independent reviews, please download our IM to receive an adviser pack.
4) Whilst the government has capped pension contributions, EIS is progressively being expanded
The government is progressively moving against the high burden of attractive pension schemes, lowering the cap of the Life Time Allowance to just over £1.0million. In contrast to this, successive governments have been expanding EIS, and the Knowledge Intensive Company classification of EIS (although not relevant to all) means that up to £2.0million can be invested per year in EIS qualifying companies that meet the criteria.
With Mercia’s strong processes, experienced investment teams, committee oversight and corporate governance in place, our funds are doing well and are expected to accelerate as some companies achieve their full value. Mercia is a highly experienced investor, and we expect to provide superior returns, in addition to tax benefits for your clients.
If you have clients who are affected by pension caps, it may be appropriate for you to consider our regular contributions facility, through which investors can make a monthly contribution to our EIS Funds and rapidly create a diverse EIS-qualifying portfolio of high-growth early-stage investments.