Press releases

25 January 2012

VCT performance rivals conventional companies in 2011

Half of top ten performing investment companies to end December were VCTs

Considering the market turbulence last year, the VCT sector fared relatively well, with performance to rival that of the wider investment company sector. Half of the top ten performing investment companies to the end of December 2011 were VCTs, suggesting that the sector has held its own in 2011. Although the VCT sector as a whole was down 3% at the end of last year, it outperformed the average investment company, which was down 11% over the same period, and was in line with the FTSE All-Share.  The VCT Generalist sector was up 0.5% over the year, whilst the Sector Specialist: Media, Leisure & Events sector was up 1%.

The best performing VCT over twelve months was Foresight VCT from the VCT Specialist: Technology sector, up 51%. Positive returns have been made over longer periods too, the company is up 81% over three years (see table below) and has also made money for its investors over five and ten years. Ben Thompson, Marketing Director, Foresight Group said: “Foresight VCT has continued to perform strongly, and we put this down in part to a more active technology sector where there has been a resurgence in M&A activity particularly by US corporates dipping into their large cash reserves to acquire quality high growth and innovative businesses. The performance has been further enhanced by the underlying performance of Foresight VCT’s generalist investments which have seen strong revenue and profit growth driven by export markets.”

The next best performing VCT was Maven Income and Growth VCT 4, which was up 46% over the year to 31 December 2011. In fact, four of the top ten performing VCTs share the same manager, Bill Nixon. Bill Nixon, Manager of the Maven range of VCTs said: “At Maven we have maintained a generalist focus over the past few years, but have enjoyed very good returns from the energy services and insurance sectors in particular. Following the BP accident in the Gulf of Mexico a few years ago, spending in areas such as safety, integrity, and condition monitoring has increased significantly, as well as an increase in new projects and general capital expenditure across the sector underpinned by an oil price which continues to justify new field developments. Maven has consciously avoided companies which are exposed to development risk, but our VCTs have benefitted by funding many of the support companies which mostly have fairly predictable revenues and strong cash flows.”  

Commenting on the improved performance of the VCT sector generally, Bill Nixon continued: “The VCT industry has now concentrated into half a dozen or so well resourced generalist managers who, in essence, compete for the same deal flow across the UK. Outside of generalists there are also specialist managers who have defined expertise in a sector, with a VCT product focussed around their specialism. That tends to also mean more predictable and better performance.”

Positive outlook

David Hall, manager, British Smaller Companies VCT believes that: “The outlook is really positive. VCTs invest for the medium term, five to seven years - a period over which we have seen consistent returns. The current environment sees good value with asset prices at the lower end and great medium term growth prospects - that is quite a compelling combination.”

Top performing VCTS (to end December 2011)

Figures are AIC using Morningstar and based on share price total return on £100, less 3.5% expenses

Years		1	3	5	10
Overall Weighted Average Ex VCTs		88.39	147.68	100.80	192.40
VCT Weighted Average		96.88	109.97	89.35	125.27
VCT AIM Quoted		87.77	129.91	63.12	51.07
VCT Generalist		100.54	108.25	96.33	151.17
VCT Specialist: Media, Leisure & Events		100.73	83.87
VCT Specialist: Technology		101.28	124.69	105.37	84.33
Fund	Sector
Foresight VCT	VCT Specialist: Technology	151.49	180.85	107.25	150.75
Maven Income & Growth VCT 4	VCT Generalist	145.88	213.76	117.97
Maven Income & Growth VCT 2	VCT Generalist	133.08	223.01	129.29	88.83
British Smaller Companies VCT	VCT Generalist	132.77	173.89	160.41	376.29
Maven Income & Growth VCT 3	VCT Generalist	129.17	203.52	105.33	99.14
Income & Growth VCT	VCT Generalist	121.07	155.62	130.85	174.29
Rensburg AIM VCT	VCT AIM Quoted	121.04	166.23	104.55	97.13
Maven Income & Growth VCT	VCT Generalist	120.93	253.42	155.88	158.61
Matrix Income & Growth 2 VCT	VCT Generalist	120.59	97.32	74.47
ProVen VCT	VCT Generalist	117.98	126.38	181.86	297.14

Overseas exposure proves valuable

Stocks which benefited from a strong international market were highlighted as contributors to good performance for VCTs. David Hall, manager, British Smaller Companies VCT said: “Generally across the board small companies have been really resilient with values up on average 10% in our own portfolios. Those that are faring well have a good spread of international clients and we are really impressed with the manufacturing businesses - most of which do export and have a well-diversified customer base.”

Will VCTs outperform in 2012?

According to David Hall, manager, British Smaller Companies VCT, opportunities exist for companies with the right management: “The companies that we back have got the financial headroom to plan ahead. In the current climate good, well managed companies can really make progress in building market share that translates into value. This coupled with being able to give companies access to experienced management/non-executives all helps to give them an edge. This has some echoes of ten years ago and our experience from that time has reflected in great medium term opportunities.”

Bill Nixon, manager, Maven VCTs sounds a more cautious note: “The outlook for the next twelve months is reasonable to good. The market for funding new transactions is slightly perverse at the moment; whilst the economy as a whole and lack of capital in the banking sector is helping to keep vendor/owner pricing aspirations in check, competition for the better assets has increased and we have seen certain deals priced accordingly. Maven has invested heavily in a national network of six offices which generates up to 400 new introductions each year. We filter that down to around half a dozen completions each year in sensibly priced businesses where we often provide all of the finance, and price the loan stock element of our investment at a level that is aimed to produce good revenue throughput to ultimately fund a tax free dividend programme. All of these factors have contributed to more robust portfolios, steadily improving NAVs and increasing dividend yields from our VCTs.”

Annabel Brodie-Smith, Communications Director, Association of Investment Companies (AIC) said: “The VCT sector held up relatively well last year and as the VCT sector matures into its sixteenth year the longer term performance record is encouraging for much of the sector.  It is well known that VCT investors benefit from income tax relief of 30% if the VCTs are bought at launch and held for at least 5 years, and that capital gains are tax free.  But it is also worth remembering that dividends on all VCTs are tax free, and there are some attractive dividend yields across the VCT sector.  For example, the Generalist sector currently has an annual average yield of 7.6%.  Investors, however, need to bear in mind that this can be a high risk sector, and it is important to do your homework, and if necessary, seek advice.” 

For daily performance data and VCT company yields, visit the AIC’s website www.theaic.co.uk

-Ends -

Notes to Editors

1. Performance figures are share price total return on £100 with a 3.5% deduction for charges, stamp duty and market spread.  Source: AIC using Morningstar.
2. Discrete % returns – share price total return on £100

Performance From	31/12/2010	31/12/2009	31/12/2008	31/12/2007	31/12/2006
Performance To	31/12/2011	31/12/2010	31/12/2009	31/12/2008	31/12/2007
Duration (Years)	1	1	1	1	1
Fund
Foresight VCT	151.49	114.29	97.27	78.5	70.35
Maven Income & Growth VCT 4	145.88	104.07	131.12	61.33	83.79
Maven Income & Growth VCT 2	133.08	108.47	143.86	53.22	101.44
British Smaller Companies VCT	132.77	111.18	109.7	79.16	108.53
Maven Income & Growth VCT 3	129.17	99.1	148.06	55.24	87.24
Income & Growth VCT	121.07	91.88	130.28	74.64	104.9
Rensburg AIM VCT	121.04	144.64	88.42	60.89	96.18
Maven Income & Growth VCT	120.93	104.79	186.23	54.16	105.76
Matrix Income & Growth 2 VCT	120.59	101.75	73.86	72.76	97.95
ProVen VCT	117.98	109.02	91.49	117.88	113.69

1. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment.  Today, the AIC represents a broad range of closed ended investment companies, incorporating investment trusts and other closed ended investment companies and VCTs.  The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help Members add value for shareholders over the longer term. The AIC has 345 members and the industry has total assets of approximately £90.3 billion.

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