EIS AIM Fund

[127tolmers]

This new Seneca fund just caught my eye and follows on from their successful VCT new class launch. Is this a better proposition than an AIM VCT for those that can afford the minimum investment?

https://www.wealthclub.co.uk/eis-invest ... -eis-fund/

Highlights

Targeting 5-10 investments per investor portfolio
Wholly focussed on AIM-quoted EIS-qualifying companies
Track record of making EIS-qualifying AIM investments and returning capital to investors – past performance is not a guide to the future
1.5x target return before tax relief – not guaranteed
Target exit within 3-4 years – not guaranteed
Minimum investment £20,000 – you can apply online

[barchid]

Tolmers
EIS relief is attractive if you have CGT on a property at 28% and pay income tax at 45%, so you only take the 30% relief on purchase but also defer your cgt and if the eis fails you then have a slightly higher relief on the Income tax which pays your deferred bill, if your cgt is 18% or 10% it is less efeective.
Additionally these funds charge hearty performance fees (if you thought vct's fees were stiff these can be eyewatering) and don't forget their annual management fees either, which usually need to be paid in cash each year & often eat a substantial amount of your 30% you took on the way in.
Also a vct can be exited after 5 years, an eis can take time to be found, more time for HMRC to give it their certificate, can be exited after 3 year with no tax claw back but in my range of EIS funds I started in 2015 & only 10% have been realised.
As they are realised I put the cash straight back into a vct as they have one more advantage, ie a dividend ! The eis also likely comes with higher fees from your accountant for the extra work it causes them.
Perhaps I was unlucky but my gut feel is under most circumstances a vct is a better, more flexible investment unless you have a 27% cgt bill to defer.
And a vct is better diversified, as a rule.

[Spet0789]

Tolmers
EIS relief is attractive if you have CGT on a property at 28% and pay income tax at 45%, so you only take the 30% relief on purchase but also defer your cgt and if the eis fails you then have a slightly higher relief on the Income tax which pays your deferred bill, if your cgt is 18% or 10% it is less efeective.
Additionally these funds charge hearty performance fees (if you thought vct's fees were stiff these can be eyewatering) and don't forget their annual management fees either, which usually need to be paid in cash each year & often eat a substantial amount of your 30% you took on the way in.
Also a vct can be exited after 5 years, an eis can take time to be found, more time for HMRC to give it their certificate, can be exited after 3 year with no tax claw back but in my range of EIS funds I started in 2015 & only 10% have been realised.
As they are realised I put the cash straight back into a vct as they have one more advantage, ie a dividend ! The eis also likely comes with higher fees from your accountant for the extra work it causes them.
Perhaps I was unlucky but my gut feel is under most circumstances a vct is a better, more flexible investment unless you have a 27% cgt bill to defer.
And a vct is better diversified, as a rule.

Agree with this. There are 3 or 4 good AIM VCTs which are far better investments until you hit the £200k limit.

[Bgsbgs]

Tolmers
EIS relief is attractive if you have CGT on a property at 28% and pay income tax at 45%, so you only take the 30% relief on purchase but also defer your cgt and if the eis fails you then have a slightly higher relief on the Income tax which pays your deferred bill, if your cgt is 18% or 10% it is less efeective.
Additionally these funds charge hearty performance fees (if you thought vct's fees were stiff these can be eyewatering) and don't forget their annual management fees either, which usually need to be paid in cash each year & often eat a substantial amount of your 30% you took on the way in.
Also a vct can be exited after 5 years, an eis can take time to be found, more time for HMRC to give it their certificate, can be exited after 3 year with no tax claw back but in my range of EIS funds I started in 2015 & only 10% have been realised.
As they are realised I put the cash straight back into a vct as they have one more advantage, ie a dividend ! The eis also likely comes with higher fees from your accountant for the extra work it causes them.
Perhaps I was unlucky but my gut feel is under most circumstances a vct is a better, more flexible investment unless you have a 27% cgt bill to defer.
And a vct is better diversified, as a rule.

This EIS fund invests only in AIM traded securities so they should be able to exit in 3 years or so. That is the main advantage over a VCT (for me) - you can claim 30% tax relief every three years (if you then re-invest) instead of every 5 years (plus loss relief as you mention).

The fees do indeed seem to be high for not that much work on these funds (not much competition?), especially the performance fee which AIM VCTs don’t charge.

It is also higher risk than an AIM VCT because you are buying into younger companies rather than getting a stake in a mature portfolio with some new investments as you get in a VCT.

[127tolmers]

Additionally these funds charge hearty performance fees (if you thought vct's fees were stiff these can be eyewatering) and don't forget their annual management fees either, which usually need to be paid in cash each year & often eat a substantial amount of your 30% you took on the way in.
Also a vct can be exited after 5 years, an eis can take time to be found, more time for HMRC to give it their certificate, can be exited after 3 year with no tax claw back but in my range of EIS funds I started in 2015 & only 10% have been realised.
As they are realised I put the cash straight back into a vct as they have one more advantage, ie a dividend ! The eis also likely comes with higher fees from your accountant for the extra work it causes them.

I thought the Seneca AIM EIS fund's fees were not unreasonable if you invest direct and not via an advisor.

An unavoidable 3% up front (similar to VCTs), zero annual management fee (ave VCT 2.5% pa), 4.8% exit fee ( VCT discount 5%) and performance fee of 20% only after initial funds returned and then at 20% on portfolio not individual gains (AIM VCT performance fees rare). I am not sure there is a significant in increase in paperwork (5-10 EIS3 certs) offset by faster recycling of tax relief money. All AIM shares should be liquid so no long tail rump.

[Bgsbgs]

I thought the Seneca AIM EIS fund's fees were not unreasonable if you invest direct and not via an advisor.

An unavoidable 3% up front (similar to VCTs), zero annual management fee (ave VCT 2.5% pa), 4.8% exit fee ( VCT discount 5%) and performance fee of 20% only after initial funds returned and then at 20% on portfolio not individual gains (AIM VCT performance fees rare). I am not sure there is a significant in increase in paperwork (5-10 EIS3 certs) offset by faster recycling of tax relief money. All AIM shares should be liquid so no long tail rump.

Do you have a link for investing directly? I only saw it on wealth club who charge 5% upfront.

[127tolmers]

Do you have a link for investing directly? I only saw it on wealth club who charge 5% upfront.

My link was from Wealth Club. Sadly I think I misread the fees and apologise. It doesn't seem to work like a VCT subscription fee on closer reading.

Fees Paid at Outset
The following fees are paid by you by deduction from your Subscription:
An initial fee paid to Seneca Partners. This fee is either:• 2.0% + VAT* (where you have received advice from a financial adviser); or
• 5.0% + VAT* (where no financial advice has been received).