Two Mobeus venture capital trusts raised £9.6million through Wealth Club within just an hour of their latest share offer opening on 2 September.
This delivered funding 140 per cent higher than the trusts’ previous fastest raise. The VCTs have now raised £33.8million, with around 60 per cent of this via Wealth Club.
The two VCTs, both managed by Gresham House, are looking to raise at least £70million. The share offer includes an over-allotment option of £20million.
Growth prospect: Investing in VCTs can deliver considerable gains by allowing smaller firms to flourish
Nicholas Hyett, investment manager at Wealth Club, an investment service for high net worth and experienced investors, said: ‘The pace of the raise is encouraging.
‘After the general investment malaise of the last couple of years and the downturn in venture investing, it looks like wealthier investors – when presented with a good opportunity (which the Mobeus VCTs are) – remain more than willing to back young innovative UK businesses.’
‘It’s good news for the investment world and even better news for the economy as a whole: young businesses are vital to job creation and growth.’
The surge in investment, which has kicked off the VCT fundraising season, coincides with uncertainty over the prospect of a capital gains tax hike by the Government in the upcoming Autumn Budget.
With fears abounding that a CGT increase is on the cards, it appears investors are looking to reduce their exposure to the levy.
VCTs not only offer investors tax relief and tax-free dividends, but they are also free of capital gains tax.
As a result, investors could be keen to cash in on these tax benefits, shifting non-Isa holdings in order to reduce their tax liability further down the line.
The two VCTs on offer are a combined portfolio of around 50 companies. These range from early-stage firms to later-stage ones that are already profitable.
In the past five years, the VCTS have generated a total return of 71.2 per cent.
However, before rushing to buy into a VCT, it is important to consider the risks.
What do VCTS offer and what are the dangers?
One of the main attractions to VCT investment are the tax breaks that it offers. These tax breaks are offered in order to make smaller business investment attractive and are intended to compensate investors for the risk of backing smaller and younger firm.
VCT dividends are not subject to the £500 tax-free dividend limit, instead being completely tax free. Meanwhile, investors can also gain 30 per cent tax relief is available upfront if they hold their investments for at least five years.
And VCT investments are free of capital gains tax.
VCTs offer investors access to smaller companies that often experience rapid growth. This means that astute investors can make considerable returns while helping young companies raise the funds they need.
On top of this, smaller companies investment is less impacted by wider market movements, meaning that it can prove a good way of diversifying a portfolio.
However, VCTs are considerably more risky than many other investments.
With high risk can come high reward, and these companies can grow incredibly fast.
On the other hand, investors need to bear in mind that smaller companies have a higher rate of failure than larger counterparts.
On top of this, there is not an active VCT market, meaning that finding a buyer for your shares might be difficult, and you may have to accept a price below net asset value of the investment.
Who are VCTs for?
Given their risky nature, VCTs tend to be more popular with wealthy investors who have already maxed out their tax wrappers.
Unlike an Isa, which has a £20,000 annual allowance, the VCT allowance is £200,000, meaning that these investors could save themselves up to £60,000 in upfront tax.
These investors are also more capable of coping with losing their investment and are able to leave it untouched for the five-year period they need to qualify for tax relief.
Wealth Club said those nearing or in retirement can also benefit from investing in VCTs, using the tax-free dividend to supplement their pension income.
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
Saxo
Saxo
Get £200 back in trading fees
Trading 212
Trading 212
Free dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
This article was originally published by a www.dailymail.co.uk . Read the Original article here. .