A milestone

[naflod]

Generally the investors in VCTs around here fall in to one of two camps, those that recycle funds every five years and those that have built up a portfolio that will provide a long term tax free income. I fall firmly into the latter camp and reached a milestone last Thursday when the Proven VCT and Proven Growth & Income VCT, both went ex div and so were entered onto my spreadsheet as guaranteed to come in. Eighteen years and four months after my first venture (if you will pardon the pun) into the world of VCTs, they have paid for themselves.

In an exercise that I hope will be of interest, calculated where the average £1,000 was spent and where it returned.

Purchases:
Subscription for new shares ............ £646.31
Dividend reinvestment (qualifying) .... £276.06
EBB* from market purchases ........... £ 31.26
It seemed like a good idea ............. £ 28.47
Anticipated EBB didn't happen ......... £ 12.10
Baronsmead dividend reinvestment ... £ 5.80

Received in return:
Dividends ................... £700.51
Tax relief ................... £294.74
Commission rebates ....... £ 4.89

Giving me an extra 14p back on each £1,000 invested and leaving me holding £733.16 value of shares at the mid price, with an XIRR of 11.92%. The first investment using a qualifying dividend reinvestment scheme came in 2012.

Over the next month or two I will fluctuate back and forth bit as some dividends will result in reinvestment and so only the tax element rather than full cash will actually be received.

The only eligible EBB that I had for shares held from subscription was for Ventus, but they announced it so late in the tax year, that I had already my and Mrs naflod's anticipated availability in subscribing for new VCTs, so we missed out.

I would like to express my thanks to all Fools, old and new, here and, once upon a time, elsewhere who have contributed to this forum and its predecessor. My best return by a country mile arose from one such discussion, Core IV which returned an IRR of 110.8%, alas I was able to buy so few that it was hardly worth it! Ditto, my best genuine performer with an IRR of 23.0% is Maven 5, which I was able to buy in suitable quantity ahead of the EBB, achieved an effective tax relief rate of just under 47%.

My worst performer on the other hand and, thankfully my only loss to date with a negative 22.6% "retun" per year, was in Edge D, it was made as a play on its portfolio being dominated by Coolabi, a decision I wrote up under the title "Have I dropped a Clanger?". In hindsight the answer was a resounding yes.

naflod

PS Apologies for the formatting short cut, but I'm on holiday and can't be bothered refreshing my memory

* EBB - Enhanced Buy Back

[scotia]

Eighteen years and four months after my first venture (if you will pardon the pun) into the world of VCTs, they have paid for themselves.

I started around the same time with Northern 3 in March 2005. Those were the days -tax relief was 40%, but that only lasted two years before it dropped back to 30%, however the Enhanced Buy-Backs continued to 2014. So I managed EBBs from Northern 3, Amati, and Hargreave Hale issues. I have tended to sell after the end of the tax relief period, and re-buy new issues. A few years ago we decided, as we were becoming oldies, it was time to simplify our potential estates, so we are now winding down our collection of VCTs, and we should have sold out within a couple of years.
But they certainly performed well. When I started with my first VCTs, I thought that they were high risk, with possibly high capital gains, or maybe substantial losses - and that was the warning that went with them. However the opposite proved true in most cases - they were high tax-free income vehicles with relatively modest capital variations.
Looking over my records, I think that possibly their best days are over - particularly for some that used to be much sought after. But if I were a bit younger, I would still be holding VCTs as part of my portfolio.
There is a government note, published earlier this year, on VCT statistics https://www.gov.uk/government/statistics/venture-capital-trusts-2022/venture-capital-trusts-statistics-2022

[flyer61]

Was very surprised at how few people subscribe to VCTs on an annual basis.