94% of adviser clients satisfied with VCT experience as fundraising season ramps up

New research highlights the range of motivations for using VCTs.

Growingdaisy

More than nine in ten (94%) adviser clients are satisfied with their experience of venture capital trusts (VCTs), according to new research from the Association of Investment Companies (AIC) conducted by Research in Finance.1

In the AIC’s survey, advisers said more than two-thirds of their clients (68%) feel that by using VCTs they’re supporting UK entrepreneurs2 and 67% of clients value the growth potential of backing young companies early.

Nearly two-thirds of adviser clients (62%) believe that by using VCTs they’re supporting cutting-edge science such as healthcare and technology innovations3 and 52% of clients appreciate they can support green technologies by using VCTs.4

Advisers reported that VCTs’ portfolio diversification, tax-free dividends, ability to trade on a stock exchange and proven track record were benefits of VCTs over other forms of tax-efficient investment.

Nick Britton, Head of Intermediary Communications at the Association of Investment Companies (AIC), said: “The research highlights a range of motivations for using VCTs beyond the obvious tax benefits. Clients like the feeling that they’re supporting UK entrepreneurs, backing cutting-edge science and getting in on the ground floor by backing young companies early. While VCTs remain high-risk, they now have a well established track record and it’s encouraging that the overwhelming majority of clients are satisfied with their experience of VCTs.”

Advisers reported that clients are most likely to spend any tax-free dividends they receive from VCTs (47%), followed by reinvesting them in VCTs (36%) and reinvesting them in other types of investment (13%).

Almost all advisers (99%) recognise that VCTs offer tax benefits. Of this group, 86% believe the upfront income tax relief is VCTs’ most important tax benefit, ahead of tax-free dividends (8%) and tax-exempt capital gains (6%). 

Choosing a VCT

41% of advisers feel that the VCT manager’s reputation is the most important factor when researching a VCT to invest in, followed by past performance (32%) and the merits of specific portfolio holdings (12%).

ESG and COVID-19

59% of advisers agree that the pandemic has made ESG considerations more important to their clients.5


Weighted average VCT performance to end February 2021

Performance measure

Share price total return (%)

Share price total return (%)

Share price total return (%)

Share price total return (%)

Performance from

01/03/2020

01/03/2018

01/03/2016

01/03/2011

Performance to

28/02/2021

28/02/2021

28/02/2021

28/02/2021

Duration

1 year

3 years

5 years

10 years

VCT weighted average

8.87

16.30

34.98

139.08

Source: AIC/Morningstarurce: AIC/Morningstar.

 

Watch Venture Capital Trusts Explained for more information on VCTs

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Notes to editors

  1. The research was completed by Research in Finance on behalf of the AIC between 1 and 10 February 2021. The research consisted of an online survey of 154 independent financial advisers and financial planners who recommend VCTs to clients.
  2. 60% of advisers agreed that by using VCTs their clients feel they’re helping UK entrepreneurs. 8% strongly agreed.
  3. 56% of advisers agreed that by using VCTs their clients feel they’re supporting cutting-edge science such as healthcare and technology innovations. 6% strongly agreed.
  4. 47% of advisers agreed their clients appreciate that they can support green technologies by using VCTs. 5% strongly agreed.
  5. 47% of advisers agreed the pandemic has made ESG considerations more important to their clients. 12% strongly agreed.
  6. 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 361 members and the industry has total assets of approximately £237 billion.
  7. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance.  The value of investment company shares, and the income from them, can fall as well as rise.  You may not get back the full amount invested and, in some cases, nothing at all.
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