07/03/23

UK: VCTs 'attractive' to 89% of wealth managers in volatile markets.

As published on investmentweek.co.uk, Tuesday 7 March, 2023.

A majority (89%) of financial advisers and wealth managers think venture capital trusts have become ‘attractive’ for clients in current difficult market conditions, according to research.

Overall, a quarter (26%) went so far as to say VCTs were currently ‘very attractive', the research by YFM Equity Partners found.

In a period of constrained traditional financing, 82% of wealth managers pointed to the advantages of VCTs in their ability to back small, fast-growing UK companies, saying this was either a key decision criterion or very important.

VCTs aim to produce higher investment returns by backing early-stage businesses during an economic downturn, which leaves more scope to benefit from the eventual turn in the cycle.

Some 89% of intermediaries see market volatility leading to greater diversification in retail investor portfolios, with VCTs set to benefit.

However the most popular reason wealth managers are recommending VCTs to clients ahead of the tax year end (61%) is to benefit from receiving 100% tax-free dividends.

Around a third (32%) cited the 30% upfront income tax relief on investments up to £200,000 per tax year.

David Hall, managing director of YFM Equity Partners, said VCTs have "a proven track record" in delivering resilient returns during all stages of the economic cycle, "and by investing today there's a bigger opportunity to benefit from the eventual upswing".

He added: "With volatility comes opportunity, and in times such as these, VCTs provide the funding young, growing businesses need alongside delivering attractive long-term returns for investors."