VCT sales slowing down?

[Kidman]

There is an article on the FT website today titled "VCT inflows dive as investors opt for safety".

If you are not a paid subscriber you may be able to read it as one of your free allocation each month but I'll quote from the introduction to give you a flavour:-
"According to data from Wealth Club, an investment service, investments into VCTs from April 6 2023 to January 15 2024 totalled £366mn, down 27.4 per cent from £504mn in the same period last year."

I feel there is an upside of fund-raising being less than hoped for by the managers, less money chasing after deals and putting acquisition prices up.
On the other hand exit values are probably down and companies need ongoing funds so we are seeing that to some extent in downward revaluations.

[oxmatt]

Or an increase in pension annual and lifetime allowances.

[UncleEbenezer]

"According to data from Wealth Club, an investment service, investments into VCTs from April 6 2023 to January 15 2024 totalled £366mn, down 27.4 per cent from £504mn in the same period last year."

I'd be more interested to see that figure in the context of a longer-term trend than a single year's change. And the significance of Jan 15th seems rather questionable, unless the real Agenda of the article is to remind (or perhaps in some cases inform) readers of the opportunity to save tax before April.

[pete160]

I suspect the reasons include Increases in pension limits, higher interest rates from less risky investments (including. gilts) and quite a number of higher rate taxpayers taking early retirement or certainly reducing hours.
Money can't buy you time

[Karellan]

I feel that they are a poor hold at present so can understand why current investors do not want more.

[Mainwaring]

I certainly have a few poor holds at the moment but I’m still at it (18 years). I suspect volumes are also down as advisors/clients who let the tax tail wag the dog are having difficult conversations about the last few years investments being worth less than if they’d just paid tax on the earnings. That third party money will be taking a break.
I think many of us on here are quite discerning and research best we can to choose which houses to support from year to year, based on the portfolios behind the trusts. Maybe I’ve been quite lucky but I’ve a concentration in Mobeus and Albion without naming them all and I seem to recall my best VCT decision turned out to be continuing VCT investments through the GFC in 2008/9. I’m guessing that money was made when an investment was bought rather than when it was sold and I’m hoping that’s become the case now with several commentaries flagging that prices are much more realistic these days. I’ve topped up Albion and Maven myself this time.
Anyway doing a little something every year works for me.

[OhNoNotimAgain]

Never let the tax tail wag the investment dog.

[sinterklaas]

Octopus Titan has raised around 100m less so far this year compared to last Jan.

That alone accounts for much of the difference

[UncleEbenezer]

Octopus Titan has raised around 100m less so far this year compared to last Jan.

That alone accounts for much of the difference

Interesting. There was me thinking, if I ever buy back in to Titan, now would be a good time - while any gains won't be subject to their 20% super-tax for a while.

[sinterklaas]

Octopus Titan has raised around 100m less so far this year compared to last Jan.

That alone accounts for much of the difference

Interesting. There was me thinking, if I ever buy back in to Titan, now would be a good time - while any gains won't be subject to their 20% super-tax for a while.

Yes this seems smart thinking to me. But the bulk of money seems to flow from people thinking back not ahead, ie buying past performance

[Spet0789]

Interesting. There was me thinking, if I ever buy back in to Titan, now would be a good time - while any gains won't be subject to their 20% super-tax for a while.

Yes this seems smart thinking to me. But the bulk of money seems to flow from people thinking back not ahead, ie buying past performance

I agree completely. Putting my full VCT amount into Titan this year for that reason. Not bought before because of the performance fee.

[TuppyGlossop]

Interesting, I too had always spurned Titan due to the performance fee. Do you have a link with more details of its suspension please (google did not yield much)?

[Mainwaring]

Titan peaked sometime around Jun 21 YE. I think they took their last performance fee then. Since the NAV is down around 30p so looking at the following paragraph you can check out the specific details. They’ve to recover NAV net of dividends to the past peak before they get the next performance fee, in principle.

I say in principle as I have seen before that Boards sometimes rewrite manager incentive benchmarks lower so that they remain motivated to outperform once again!

2. We want our investments to do what we say they will. When the performance of the companies we invest in exceeds expectations, we think it’s fair to take a performance fee of 20% on all future gains. In order to do so the NAV plus cumulative dividends of the Octopus Titan VCT at the year end (31 December) must exceed the previous highest NAV plus cumulative dividends (net of performance fee already taken), Octopus will charge a 20% performance fee on the excess. For full details on the performance fee and other fees please see the prospectus and Key Information Document (KID).

[Kidman]

Details of the current performance fee position from the Octopus Titan 2022 annual report, note 19:-

"Due to performance in the period, the Total Value has decreased to 173.9p, representing a total loss of 23.8p.
The High Water Mark for FY 2023 will therefore be 197.7p. If, on a subsequent financial year end, the performance value of Titan falls short of the High Water Mark on the previous financial year end, no performance fee will arise. If, on a subsequent financial year end, the performance exceeds the previous best High Water Mark of Titan, the Manager will be entitled to 20% of such excess in aggregate."

I believe the "performance value" for financial year end 2023 will be the NAV at year-end plus cumulative dividends paid per share since launch.

[Kidman]

Titan peaked sometime around Jun 21 YE. I think they took their last performance fee then.

Indeed, from page 99 of their 2022 annual report it was £63,943,000 in the 2021 FY.

My understanding of the "performance value":-
at 31 Dec 2022: 173.9p, being NAV of 76.9p and cumulative dividends of 97.0p
at 30 Jun 2023: 168.2p: being NAV of 68.20 plus cumulative dividends of 100.0p.