AIC welcomes the ‘Future Fund’

The Association of Investment Companies (AIC) has welcomed the Government’s new initiative announced today, the Future Fund. This fund will provide loans to the UK’s innovative companies which are suffering financial difficulties due to the coronavirus outbreak. The Government’s loans will range between £125,000 and £5 million and will be matched by private sector money from venture capital investors.

Ian Sayers, Chief Executive of the Association of Investment Companies (AIC), said: “The Government’s plan to provide loans to some of the UK’s most innovative companies is really encouraging. Coronavirus has had a devastating impact on the economy and it’s particularly important that these high-growth, dynamic companies survive, grow and thrive. As ever the devil is in the detail, and we look forward to engaging with the Government to understand more about the loan scheme when further information is available.

“Venture Capital Trusts (VCTs) support these types of innovative companies with high potential for growth in sectors as diverse as healthcare, retail and green technology. VCTs meet the funding gap for these companies but also provide wider expertise and support to help them grow. It is vital that the UK provides a fertile environment for these dynamic companies which have the potential to grow into tomorrow’s household names.”

AIC report

The AIC recently issued the report, Butterfly effect: The transformational potential of VCT investment. The report surveys investment by VCTs since November 2017 when new rules were introduced directing the tax-advantaged vehicles towards higher-risk investments1.

Our report finds that VCTs have invested in over 181 businesses with high potential for growth since November 2017. VCTs are able to invest in businesses with up to 250 employees: however, these businesses employ an average of 38 people each and nearly half of them (45%) have fewer than 25 employees.

These dynamic small businesses generated £395m of sales in 2019 of which £126m were exports. However, no company in the survey reported sales of more than £5m for the last financial year.

Knowledge-intensive companies2 made up 28% of the 181 businesses in the survey, and 37% of VCT investment was directed outside London and the South-East. The report contains 25 case studies of companies that have received investment since the 2017 rule changes.


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  1. Significant changes to VCT rules were introduced in the 2017 Budget. These added a ‘risk to capital condition’ for new VCT investments to qualify for income tax relief. The condition ensured that VCT investment would focus on businesses which were taking substantial risks with a view to delivering high growth. The rule changes also restricted VCTs’ use of debt financing, increased the proportion of VCT funds that must be held in qualifying companies from 70% to 80%, and doubled the amount VCTs could invest in a knowledge-intensive company from £5m to £10m annually. Changes were also made to VCT rules in 2015, limiting the age of investee companies to a maximum of seven years in most cases and prohibiting VCT investment in MBOs.
  2. Knowledge-intensive companies are a subset of companies that qualify for VCT investment, and receive special treatment under VCT rules. They must meet conditions related to spending on research and development, employing highly-qualified people and/or developing intellectual property.
  3. The survey data records investments made by participating VCT management groups. Please see the acknowledgements section of the report for details.
  4. The survey period covered investments made after 4 December 2017 to November 2019. It may not capture all investments made as submission dates for data varied.
  5. 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. As at the end of March, the AIC had 363 members and the industry had total assets of approximately £184 billion.
  6. 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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