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Venture Capital Trust Guide

 

Benefits

The tax relief offered on VCTs is often cited as their main advantage but, alone, this is not enough to recommend the trusts to investors. It is important to note that even if there were no tax concessions most VCTs are potentially rewarding investments in themselves, as these other benefits show:

Historical Performance
Several VCTs have already achieved a total return of investors' original investment after tax relief. This could mean that investors will have a substantial part of their initial investment returned to them within five years.

Cost
Due to the considerable amount of work that has to be put into each investment decision, VCT managers have made higher annual management charges than conventional investment trusts. All trusts so far have kept their charges at reasonable levels, but some may also charge annual performance fees if they exceed their targets. This means that managers have a strong incentive to optimise the risk/reward relationship.

Smaller Companies Outlook
Over the longer term smaller companies have tended to outperform larger companies. This is because they are more flexible and can respond to growth opportunities more nimbly. They can readily exploit niche developments under the radar and, once pinged, put themselves in the way of being bought up at premium prices by larger, institutional corporations. It is important to remember that stakes in smaller companies can be undervalued - or nor valued at all - for long periods.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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