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Buying VCTs

Sophisticated and complex high-risk tax-sensitive investments in small companies: handle with care
Blagdon
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Buying VCTs

#656607

Postby Blagdon » March 29th, 2024, 12:26 pm

Is anyone here still buying VCTs new or second-hand?

Boots
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Re: Buying VCTs

#656615

Postby Boots » March 29th, 2024, 12:53 pm

Yup.

Why do you ask?

Blagdon
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Re: Buying VCTs

#656662

Postby Blagdon » March 29th, 2024, 2:53 pm

10-15 years or so ago I bought quite a lot of second hand VCTs at big discounts to NAV and did very well out of it until the big discounts were no longer available. Since then I have been a bit so so about VCTs. However I now expect to be paying at least basic rate (more likely higher rate) tax on both dividends and capital gains - which is causing me to look at all the tax free alternatives.

Boots
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Re: Buying VCTs

#656665

Postby Boots » March 29th, 2024, 3:10 pm

OK, I understand.

I have never bought secondhand, but I have been buying steadily for the past five years or so. I like the reasonably steady tax-free income stream, especially in the tightening tax regime we are "enjoying" at the moment.

Sadly the capital values of most of them, and especially AIM based trusts, has taken a pasting over the past couple of years. I can only hope that these recover. But I find that the income stream has been fairly consistent.

I expect to continue to be a buyer for many years to come.

UncleEbenezer
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Re: Buying VCTs

#656678

Postby UncleEbenezer » March 29th, 2024, 3:48 pm

Boots wrote:Sadly the capital values of most of them, and especially AIM based trusts, has taken a pasting over the past couple of years. I can only hope that these recover. But I find that the income stream has been fairly consistent.

I expect to continue to be a buyer for many years to come.

Those capital values are volatile!

Now may or may not be a good time to buy. But one thing's clear: it's a better time to buy than it was a year ago - especially the AIM ones, and those with watermarked performance incentives for management! I've subscribed £10k over two offers this season, which is my normal pattern these days and essentially clears my income tax liability.

But it's been quite a few years since I bought secondhand. My lifetime track record of secondhand VCTs was Acuity just before the Foresight takeover (a rollercoaster but eventually profitable), Ventus 2 and Maven 5 (both very profitable).
Last edited by UncleEbenezer on March 29th, 2024, 3:51 pm, edited 1 time in total.

Blagdon
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Re: Buying VCTs

#656679

Postby Blagdon » March 29th, 2024, 3:51 pm

Thanks for your comments. Any suggestions from what is still available this tax year?

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Re: Buying VCTs

#656681

Postby UncleEbenezer » March 29th, 2024, 3:56 pm

Blagdon wrote:Thanks for your comments. Any suggestions from what is still available this tax year?

I use Wealthclub to buy, and browse available offers at https://www.wealthclub.co.uk/venture-ca ... ts/#offers in the context of things like not repeating last year's purchases or buying one where I'm already overweight.

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Re: Buying VCTs

#656729

Postby Karellan » March 29th, 2024, 7:43 pm

Blagdon wrote:Is anyone here still buying VCTs new or second-hand?

Moi , I too bought a lot when they were cheap and they turned out to be a good steady income. Should have bought more , I still have them all.

I am buying new too but the good times of 10+ years ago are gone and I notice that as I buy in tranches sometimes years apart its noticable that newer tranches dont have the return of older investments.

I am pretty well maxed out on most of the big names for my comfort level and with amalgamations (Baronsmead+Mobeus=Gresham , Northerns...) and changes / general personell changes of others I think one must look more broadly. Many of the newer upcoming offerings dont seem to have the verve of Baronsmear 20 years ago and with rising interest rates I wonder how they will fare. It leads me to consider whether I should sell some in order to hang on to the tax return which to date I have not really done. I wondered whether as many of the newer ones have EIS attached to their management offering that VCTs were just a way of growing their customer base.

The weakness in the AIM/smallcaps market has resulted in an income stream that is matched usually by a capital loss for me at least. General income has been getting weaker too. I feel that this will reverse eventually and some VCTs will be good investments. It will be annoying if the management groups claim that it was their skill and take their 20%.

So as usual nothing stays the same.

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Re: Buying VCTs

#656742

Postby Blagdon » March 29th, 2024, 8:21 pm

I completely agree that the good old days of big gains will not return. I use MS Money religiously and so have a very good handle on where I make money. I made over 30% annual return (XIRR) across second hand dog VCTs. I made serious money on Core and a lot of money on various Downing.

I have just bought enough Octopus Titan to use up my income tax - but I am largely retired so not big sums of money.

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Re: Buying VCTs

#657141

Postby Kidman » March 31st, 2024, 10:17 pm

I have bought VCTs since they were introduced and in the early days I was one of the secondhand buyers.
Those were the days of c30% discounts, more than the initial 20% tax-rebate and with no holding period.
Those days are long gone so I would say forget secondhand VCTs now.

I still buy a few new VCT shares, but very few, because I believe that over ten years, and possibly five years in some cases, I make better post-tax money on ordinary shares and investment trusts than I do on VCTs. Furthermore I have no minimum holding time. Granted the CGT allowances have reduced which favours VCT shares but I have other VCT concerns such as poor governance, high running costs, tighter restrictions as well as illiquidity and lack of returns. I can buy private equity investment trusts which have all the VC/PE potential but better, albeit taxable, returns in many cases.


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