New research reveals VCTs’ resilience in face of the pandemic

67% of managers report improved or unchanged conditions for portfolio companies.

Listing image

67% of managers report improved or unchanged conditions for portfolio companies.


Venture Capital Trusts (VCTs) showed extraordinary resilience in 2020 despite the challenges of the pandemic, according to a new survey of VCT managers conducted by the Association of Investment Companies (AIC).

In the survey, which was conducted between 1 December 2020 and 6 January 2021, 40% of managers said trading conditions for their investee companies had improved since January 2020 with a further 27% saying conditions were unchanged. Reflecting this, the average VCT delivered a positive total return of 4% in 2020, while the FTSE All Share delivered a 10% loss in the calendar year and UK GDP shrank 9% between January and November.

Of the VCT managers surveyed, 53% made at least the same number of new investments in 2020 as they did in 20193. The same percentage (53%) said COVID-19 had either increased investment opportunities or that it had no impact, with 33% reporting it had diminished opportunities.4

Four-fifths (80%) of VCT managers reported that they are investing in businesses helping in the fight against COVID-19, from developing vaccines and testing kits to manufacturing antimicrobial curtains for hospitals.

Carrying on

Despite the challenges, everyone (100%) said there had been unexpected positives to the pandemic, such as virtual meetings allowing more time to be spent with investee companies, increased demand for digital services or increased investment opportunities.

Four-fifths of respondents (80%) said the process of monitoring portfolio companies was either unchanged or had been made easier by the pandemic, with 20% saying it had been made harder.5 Two-thirds (67%) said sourcing and evaluating potential investments was either unchanged or made easier versus 33% who said it was harder.6

Not surprisingly, managers reported that portfolio businesses in the healthcare, technology and e-commerce sectors had benefited most from the pandemic, with leisure, hospitality and tourism holdings hardest hit.

Economic and social benefits of VCT investment

The survey found that:

  • 80% of VCT managers are investing in companies producing products or services which benefit the environment
  • 67% said the businesses in their portfolio are more likely to be carbon-neutral or mitigating for climate change than five years ago
  • 80% are investing in businesses developing treatments for diseases such as cancer and diabetes
  • 60% invest in a higher proportion of female-led businesses than five years ago


Two-thirds of respondents (67%) believed Brexit would be negative (60%) or very negative (7%) for small, young UK companies compared to 20% who believed it would be positive (13%) or very positive (7%).

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “The human cost of the pandemic continues to climb and many businesses have struggled for survival. Nevertheless, our survey suggests that many of the UK’s most dynamic younger businesses have been able to adapt to the challenging environment. VCTs invest in businesses at the cutting edge of science, healthcare and technology, businesses which are helping drive forward the medical response to the virus and helping us to do more online while staying safe. VCT investing offers many important economic and social benefits and this is clear from the number of VCT managers backing innovative businesses that benefit the environment, help mitigate climate change or are working to find treatments for disease.”

Impact of the pandemic

James Livingston, Partner of Foresight Group, the manager of the Foresight VCTs, said: “Setting aside the terrible impact on global health, the pandemic has provided the greatest economic challenge for generations, but we’ve been continuously impressed with how the entrepreneurs we work with have navigated through it. Our investees have contributed to the fight against COVID-19, both directly – manufacturing millions of diagnostics or supplying vital equipment to dozens of hospitals – and indirectly, supplying coffee to your door or adjusting software systems to facilitate donations of millions of pounds to arts organisations. After a brief hiatus we are now working through a record volume of investments to support small companies with their recovery into 2021 and beyond.”

John Glencross, CEO and Co-Founder of Calculus Capital, the manager of Calculus VCT, said: “Many of our companies have shown tremendous agility in adapting quickly and pivoting resources in an effective manner to make a significant contribution to the UK’s response to the pandemic. COVID-19 has shown the investment community the importance of supporting smaller emerging tech and science companies, and it is these companies which will be central to building our economy and advancing our society.”

David Hall, Managing Director at YFM Equity Partners, which manages the British Smaller Companies VCTs, said: “In some ways the pandemic has accelerated trends that were already happening, the move to home working, thirst for data, and security and protection tools being just some examples. We are seeing demand for equity increasing from those parts of our portfolio and from new investment opportunities in these areas. When coupled with the equity need from those sectors that have been negatively impacted as they restart it’s hard not to see the demand for equity finance from the UK’s small businesses being pretty strong for the next few years.”

Trevor Hope, Partner of Mobeus Equity Partners, the manager of the Mobeus Income & Growth VCTs, said: “Many of our businesses, being relatively small, were able to respond positively to the challenges posed by COVID-19. In many cases, they are investing in expanding their capacity and online capabilities, their sales and marketing effort and further software development, to capitalise on the opportunities offered by a structural shift in demand, much of which we believe will remain. Employment opportunities are increasing as a result. Earlier in the year, we supported some investee companies by deferring loan interest due from them. In many cases those arrears have now been settled, but there remain a smaller number where the deferral still applies. Under VCT legislation, we are not permitted to invest further sums in investments made before November 2015, even though we may believe the business would be viable if we were able to.

“We are pleased to say that so far overall, our portfolio has not been adversely affected by the pandemic, and we have not invested further sums simply to allow survival of any business (other than the interest deferrals above). Funds have been provided either in new or existing investments for the positive reasons outlined above.”

Ian McLennan, Partner at Triple Point, the manager of the Triple Point VCTs, said: “We have spent much of the last 12 months helping existing investee companies navigate their way through the COVID-19 world. Some of these, such as those directly exposed to the consumer and hospitality sectors, have seen weakened demand, while others, such as those in digital health, have seen the crisis as an opportunity to grow market share. In the middle of 2020, when there was a dearth of capital, we launched our Kick-Start initiative which has, to date, funded four very early-stage companies. Overall we are not seeing any major issues with the portfolio as a whole, and there remain plenty of exciting new opportunities for us to pursue, as witnessed by a number of signed term sheets this year.”

Patrick Reeve, Chairman of Albion Capital, the manager of the Albion VCTs, said: “The world is changing fast. Whilst destructive to many healthy and valuable sectors, the pandemic’s lockdown has accelerated many of the trends already inherent in the way the global community is changing. The task of a venture capitalist is to evaluate how the world is changing and to gauge how that change will result in the creation of long-term value. VCTs, with their unusually long-term investment horizon, are particularly well placed to do this. This means that for me, being involved in the VCT sector is a really huge privilege.”

Supporting cutting-edge technology

William Horlick, Partner, Draper Esprit VCT, said: “While the COVID pandemic provides a substantial headwind to the global economy, investments in technology retain their ability to scale quickly and harness good gross margins. Examples from our healthtech portfolio include companies building cutting-edge technology ranging from gene synthesis, digital mental healthcare and GP video consultations, to cancer detection and tracing. This is just one of the four sectors that we invest in. With a portfolio spread across enterprise software, deeptech, consumer tech, and the healthtech and wellness sectors, Draper Esprit VCT is backing entrepreneurs with the potential to build companies that can help kickstart the economy and change the future.”

Dr Paul Jourdan, Co-Manager of Amati AIM VCT, said: “Because VCTs are typically long-term investors in innovative businesses, they have generally both weathered the COVID-19 storm well and played a crucial role by continuing to invest in new technologies and growth companies whilst many other sources of investment ran dry in the early phases of the pandemic. New technologies are going to continue to make a huge impact over the coming decade, not least in enabling the world to move to reduce its carbon footprint dramatically. VCTs play an important part in the ecosystem built up over many years in the UK which allows these technologies to be developed and commercialised successfully.”

Social, economic and environmental benefits

Jo Oliver, Manager of Octopus Titan VCT, said: “Many of the founders we see are increasingly ‘mission driven’ and we are fortunate to have backed some brilliant businesses that are making a significant and positive impact on the world around us, whether that’s helping to tackle climate change or finding solutions to complex health problems. Globally, a third of all food produce is wasted, and in the UK, households account for half of all waste. OLIO is a food sharing platform that aims to help solve that problem by connecting neighbours with each other and local businesses so that surplus food can be shared, not thrown away. More than 2.5 million people are now using its platform, who have shared almost 10 million portions of food, which is phenomenal. It also recently launched a nationwide partnership with Tesco to help reduce its food waste, which was rolled out to all 2,700 of its stores.

“Founded by three medical doctors trained at Imperial College London, Quit Genius is the world's first technology-enabled digital clinic to help people overcome addictions such as smoking, alcohol or opioids, and has already helped more than 60,000 quit. It does this through the use of pioneering behavioural therapy treatments combined with approved medications. While the business started life in the UK, it quickly expanded into the US where it has already gained some strong traction by providing comprehensive solutions for employers and health plans.”

Stuart Veale, Managing Partner of Beringea, which manages the ProVen VCTs, said: “While many entrepreneurs have endured a year of turbulence and uncertainty, we have also seen plenty of opportunity for innovation and growth. Online retailers backed by the ProVen VCTs such as Papier, MPB and My 1st Years have had a particularly successful 12 months. Amid the upheaval of the pandemic, there has also been a growing focus upon sustainability and social purpose. Three of the new investments made by the ProVen VCTs in 2020 are businesses that have harnessed technology to improve the way we live, work and play: Commonplace helps communities to play a role in urban development; Social Value Portal helps companies evaluate and improve their social impact; and Luxury Promise is driving the growth of the circular economy in the luxury sector.”

Bevan Duncan, Investment Manager of the Baronsmead VCTs, said: “The Baronsmead and Gresham House Renewable Energy VCTs coinvested in Rezatec in January 2020. Rezatec is a geospatial data analytics company – its software helps owners of forests and other critical infrastructure (water, energy) more effectively manage their assets. Rezatec is currently developing its product to help monitor carbon offsets within the forestry sector.

“One of the primary uses of Baronsmead capital is investment into sales, marketing, and technology headcount to support product development, internationalisation and accelerated sales growth. At the end of September 2020, the ten largest Baronsmead investments cumulatively had 3,117 employees – which had grown 10% over the previous year. As flagged above, many of our investments also help automate workflows which drives material improvements in efficiency.”


Follow us on Twitter @AICPRESS

Notes to editors

  1. The research surveyed VCT managers between 1 December 2020 and 6 January 2021. Respondents represent 82% of total VCT industry assets as at 31 December 2020.

  2. Weighted average VCT share price total return from 1 January 2020 to 31 December 2020.

  3. 33% made more new investments in 2020 than 2019. 20% made the same number of new investments.

  4. 33% reported COVID had no impact on the investment opportunities available. 20% reported investment opportunities had increased. 33% reported opportunities had diminished.

  5. 47% said the process of monitoring portfolio companies was unchanged by the pandemic. 33% said it had been made easier. 20% said it had been made harder.

  6. 54% said the process of sourcing and evaluating potential investments was unchanged by the pandemic. 13% said the pandemic had made it easier. 33% said it was harder.

  7. 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 359 members and the industry has total assets of approximately £229 billion.

  8. 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.
  9. To stop receiving AIC press releases, please contact the communications team.