The Lemon Fool

Wealthclub states that the Unicorm AIM VCT is now raising funds.

https://www.wealthclub.co.uk/venture-ca ... n-aim-vct/

Initial charge is 2.25% (is this slightly on the high side?), and annual management charge is 2%.

There are no concrete numbers on the buyback policy, other than that it will be at a discount to NAV. However, the bid/ask spread on HL looks pretty tight (152p / 154p), so am I correct in assuming that selling this should (given conditions remain the same) be fairly straightforward?

What are peoples' thoughts on this?

It's one of my biggest VCT holdings.

Decent but volatile track record. Market price at a bigger discount than many of its peers (unless it's changed since I last looked). And a below-average yield for a VCT: hence the long-term-rising capital value. If you buy, consider it one to hold forever in the manner of an HYP share or microcap IT you can safely hold outside a tax shelter.

UncleEbenezer wrote:It's one of my biggest VCT holdings.

Decent but volatile track record. Market price at a bigger discount than many of its peers (unless it's changed since I last looked). And a below-average yield for a VCT: hence the long-term-rising capital value. If you buy, consider it one to hold forever in the manner of an HYP share or microcap IT you can safely hold outside a tax shelter.

Thanks. That is good to hear. I'd love to have some buy-and-forget investments that I can hold into old age!

Uncle is spot on saying it is not one to buy & sell, (which many of us do with our vct's every 5 years or so to generate tax relief), as they do not seem very keen on managing their discount. However to a cynic they seem pretty good at seeing their market price increase steadily, from the 6 Jan when intention to offer was announced, price 141p, & in regular incremental 1p movements is now at 153p with the offer live yesterday. I have observed this before when they have an offer, but to be fair other managers often seem to have the same effect during an offer of new stock.
Sadly the nav has, after adjusting for divi, done effectively nothing in that time period.
Funny that eh ?
I am also a holder, been pleased with the nav movement but certainly not so pleased with the way the stock price moves, and that 2.25% charge is not exactly enticing when Amati VCT only charge 1% & actively manage their discount well, as does HHV 1.25% usually, but no issue recently, especially as the long term returns on all 3 of those vct's has been broadly similar, (maybe AMAT slightly better?).

If I buy via the offering, will I buy at the NAV, or at the market price?

bernie wrote:If I buy via the offering, will I buy at the NAV, or at the market price?

At NAV + Fees.

I own and am happy with Amati AIM VCT, thinking about Unicorn.

I share the conclusions of previous replies - the discount to NAV is annoyingly high (for a person who plans to sell after 5 years), and the dividends, although regular, are on the mean side (6.5p/share per annum). But unlike most VCTs the actual NAV (and Bid ) price has risen.
So I looked at my spouse's modest Unicorn AIM VCT investments - on February 2014 and January 2015. These both received a 30% Tax rebate, which I have assumed took place on 1st May 2014 and 2015 respectively. I have assumed the dividends were taken as cash - and not re-invested. On the assumption that she cashed in her investments on 6/2/20 at the Bid price (which she has not), I have computed the XIRR annual rate of return, and according to my computations (Which I think are correct) I have found it to be 13.1%. If there had been no Tax rebates, with all other numbers being unchanged, the XIRR would be 5.39%.
A very respectable performance. But, of course, previous performance is no guarantee of similar future performance.

As an addendum to my preceding note on Unicorn - I have been looking at the charges in the offer document on page 20. For a direct investor, subscribing £10,000, and based on the latest NAV of 31st January, they would receive 5718 shares. At a current bid price of 151p per share (today), this translates to a selling price of £8,634.

Scotia
A great way of evaluating new vct offers, I just did the same with Amati, by dividing the nav of Feb 13 by 0.99 and multiplying the number of shares by 146p the latest bid price, the selling value is £9117.51, which is a significant difference.
Just to rub salt into the wound Amati actively leave a bid in the market for their stock and will even tell holders what that price is and which MM is holding it, UAV on the other hand is a very tricky stock to dispose of, to sell £10,000 worth at anywhere close to the bid price would be quite a result !

None of this tells you anything about how things will stand in five years when your tax shackles come off and you might choose to sell.

When I bought Unicorn, the discount was bigger than it is today, now I'm sitting on a small capital gain if I sell. The rise in NAV is bigger than the discount.

When I bought Amati, selling would've been an even bigger loss (they had a notional price but the spread was huge). Now it's much tighter, but if I sell I'd still have a significant capital loss.

These figures are not entirely comparable, as my purchase dates/holding periods differ, and Amati has the higher yield despite the very-reluctant cut in 2016. Nevertheless, they are what I'd expect comparing the two different yields.

UncleEbenezer wrote:None of this tells you anything about how things will stand in five years when your tax shackles come off and you might choose to sell.

Agreed - but future performance cannot be relied upon, so a cautious investor may prefer a bird in the hand - i.e. an initial purchase at a modest discount to NAV.

I had planned to do a comparison with AMATI, which both myself and my wife hold - but we had no comparable dates to the Unicorn purchases. However my wife did have a purchase of Amati 2 on 7/3/16 (this became Amati AIM), and applying the same rules, the XIRR for this single purchase, with dividends taken as cash, was 35.2% (with tax rebate) or 19.25% (without tax rebate) at 6/2/20.

But-But-But I don't think this comparison is altogether fair. The AIM market has been extremely volatile, and so has Amati. So different purchase dates can have a dramatic effect. E.G. the new issue price of Amati on 7/3/16 was 107.2p, however this rose to 186.3p for a new issue purchase on 8/10/18, and fell back to 143.3p on a further new issue purchase of 19/2/19. The current bid price is 146p.

So I suppose we feel reasonably happy with both Unicorn and Amati - purchased over a spread of dates. But I do wish Unicorn would adopt a reasonable buy-back policy.

I hold Amati, Unicorn --- also Octopus Aim and Hargreaves Hale, all AIM VCTs. Over the past 3 years Amati has been considerably the most volatile -- range 120-180p, vs Unicorn 120-140p, Octopus 95-120p and HH 65-82p.

Needless to say, past is no predictor of the future and all the AIM trusts have (for obvious reasons) been more volatile than generalists such as Northern and Mobeus.

Subscribed for a clip Unicorn today. I agree with comments on managing the NAV but I am hopeful that the board will do this at some time in the future and narrow the discount a little.

Does anyone have a view on why Unicorn, unlike Amati, HH and Octopus AIM shos no bounce from the April lows? All other AIM VCTs have retraced half their losses; this hasn't budged since its fall.

Vulgaris wrote:Does anyone have a view on why Unicorn, unlike Amati, HH and Octopus AIM shos no bounce from the April lows? All other AIM VCTs have retraced half their losses; this hasn't budged since its fall.

Haven't been following. Did they all fall by similar amounts?

Vulgaris wrote:Does anyone have a view on why Unicorn, unlike Amati, HH and Octopus AIM shos no bounce from the April lows? All other AIM VCTs have retraced half their losses; this hasn't budged since its fall.

Unicorn doesn't frequently update their NAV, and they often announce the update well after the event. And they also usually only carry out buy-backs at significant discount to NAV. So its possible that there has been some (as yet un-announced) bounce back in NAV, but we may need to wait for a recent update before it will show through in the price. I have had a look at their recent RNS NAV pronouncements:-



So we still await a more up-to-date NAV. Meanwhile Unicorn carried out a share buy-back at 110p on 9th April.

RNS today, has NAV @ 146.4p on 30/4. So that has bounced; share price rose 3p, but nothing like the retracement on other AIM VCTs

Vulgaris wrote:RNS today, has NAV @ 146.4p on 30/4. So that has bounced; share price rose 3p, but nothing like the retracement on other AIM VCTs

Yes - Agreed- the NAV has bounced - but not as far as some of the other AIM VCTs. But this is made worse by the lack of support buying by Unicorn - so allowing a large spread and a large discount. I have moaned about this in the past and have concluded that they are not an attractive choice for anyone using a 5-year hold then sell strategy to maximise the tax rebate contribution.

scotia wrote:

Vulgaris wrote:RNS today, has NAV @ 146.4p on 30/4. So that has bounced; share price rose 3p, but nothing like the retracement on other AIM VCTs

Yes - Agreed- the NAV has bounced - but not as far as some of the other AIM VCTs. But this is made worse by the lack of support buying by Unicorn - so allowing a large spread and a large discount. I have moaned about this in the past and have concluded that they are not an attractive choice for anyone using a 5-year hold then sell strategy to maximise the tax rebate contribution.

Indeed, they look more like a hold-forever option.

But much can change in five years. When I first invested in Amati, its spread was much bigger than Unicorn's is today.

UncleEbenezer wrote:

scotia wrote:

Vulgaris wrote:RNS today, has NAV @ 146.4p on 30/4. So that has bounced; share price rose 3p, but nothing like the retracement on other AIM VCTs

Yes - Agreed- the NAV has bounced - but not as far as some of the other AIM VCTs. But this is made worse by the lack of support buying by Unicorn - so allowing a large spread and a large discount. I have moaned about this in the past and have concluded that they are not an attractive choice for anyone using a 5-year hold then sell strategy to maximise the tax rebate contribution.

Indeed, they look more like a hold-forever option.

But much can change in five years. When I first invested in Amati, its spread was much bigger than Unicorn's is today.

Yes - both Unicorn purchases are past their 5 year date, and if sold now at a substantial discount the overall gain would be less than impressive! And the dividend is also less than generous, although certainly better than a bank account. So - what to do? I certainly won't buy more unless there is a radical change in their discount policy. I'll have a look at how VCTs fare in the coming year, but I suspect I won't be adding to the total, so Unicorn may get the chop if a new addition looks more attractive.