VCT Performance

[AndrewInDevon]

The link below is taken from the latest Mobeus VCTs offer, which includes a comparative performance review of generalist VCTs over a 3,5 and 10 year periods, done by The Tax Efficient Review. A single ranking is produced for each manager.

Top is British Smaller Companies (managed by YFM), second is Mobeus. You won't see this table in Mobeus's own Investor Guide as they have chosen to focus only on 5 year and 10 year performance, excluding 3 year performance. Not surprisingly, in the Mobeus document all their VCTs are ranked 1st, 2nd, 3rd and 4th (but 7th for MIG2 over 5 years). I don't think it's unreasonable for Mobeus to focus on 5/10 year performance, given you shouldn't even think of investing in a VCT for anything less than 5 years because of the tax restriction, but even so it does make you think that perhaps performance at Mobeus is going off the boil in recent years?

https://ibb.co/fDdfZmT

[UncleEbenezer]

A couple of years back, British Smaller was mid-field, and Amati was top of the pack.

I regret that my BS holding is small (the major part was one that went when raising funds for house purchase), but a recent flurry has disproportionate influence in league tables on any timescale anchored at Now.

[onslow]

I'm fast coming to the view that most VCT performance is worse than the general markets which have a lot less risk.

In short - taxpayers subsidising a whole industry, which is a leader in misallocating capital.

[whatafool]

I also think the higher interest rate environment changes the relative appeal of VCTs (irrespective of higher interest rates hurting all growth stocks), compared to other investments.
The value of the tax rebate becomes a lot less attractive in a higher interest rate environment. A 30% tax rebate, roughly 6% per year over 5 years, is hard to match when interest rates are 0%. But when gilts yield 4% tax-free (and as high as 5% in recent months), that 30% tax rebate is no longer so impressive.

[AndrewInDevon]

I also think the higher interest rate environment changes the relative appeal of VCTs (irrespective of higher interest rates hurting all growth stocks), compared to other investments.
The value of the tax rebate becomes a lot less attractive in a higher interest rate environment. A 30% tax rebate, roughly 6% per year over 5 years, is hard to match when interest rates are 0%. But when gilts yield 4% tax-free (and as high as 5% in recent months), that 30% tax rebate is no longer so impressive.

Makes sense, especially as gilts are risk-free. One driver for me....and please don't say 'the tax tail shouldn't be wagging the investment dog' (otherwise VCTs and ISAs wouldn't exist), is for the 30% up-front tax refund to be sufficient to cover my non-PAYE tax bill in each tax year. Obviously, I'd only do this if I thought the tax-free dividends were worthwhile for a higher rate tax payer. The Mobeus offer is already 46% subscribed after only 4 days (£41.6m/£90m) which looks like investors are still hungry for it?